Anyone who’s visited Japan in recent years probably took note of the tiny automobiles peppering the roads. Particularly, the “kei”, which looked like a toy with Lilliputian wheels and a kid-sized engine has for years been a beloved Japanese favorite. It’s the go-to choice for family cars, delivery drivers and farmers who make weekly treks to the market to sell their goods. Couple their impressive storage capacity with the high gas prices in Japan, and it’s no wonder that tiny cars are the country’s prized possession.
The fuel economy of a Kei is on par with that of a Prius, and Japan’s tax system rewards drivers who opt for the little machines. Even better, you can buy a brand new Kei for half the price of a Prius. In fact, they’re so in demand that in 2013, 40% of all brand new cars sold were Keis. However, not everyone is happy about the monopoly, with the government worrying that Japanese automakers won’t stand a fighting chance if the Keis aren’t stopped.
An economic puzzle
Japanese automakers are still a foundation of the country’s economy, but they’re being defeated in a David vs. Goliath smackdown. In an effort to level the playing field, the government enacted some incredibly high sales taxes as well as gas taxes aimed at Kei drivers. In fact, the Kei car tax was upped 50%, making the final price on par with “regular” cars. According to Yoshitaka Shindo, minister for internal affairs and communications, “We need to rebalance our priorities.”
Consider that some big names come out of Japan such as Suzuki, Nissan, Toyota’s Daihatsu and Honda, and it’s easy to see why Kei has to be stopped. If you haven’t heard of this little competitor before, it’s because it’s not fit for export and is only in Japan. The tiny size and subpar safety equipment means it was only ever designed for domestic use. With engines at only 0.66 liters, on a par with a motorcycle, there’s nothing like a Kei anywhere in America.
Since the Kei is restricted to Japan, all of the research and development it requires is basically a waste, say government officials. Pursuing economies of scale is impossible as long as Keis are popular, and that’s become a big concern as Japan strives to remain competitive around the globe. Previously, the tax breaks for Keis were designed to encourage postwar Japan to ditch the motorcycles and rickshaws for cars, but it’s gone above and beyond what was expected.
Keis are popular around the country, but are especially beloved in more rural regions where incomes are lower, public transportation is poor, and Keis are truly the only affordable and relatively safe option. In these regions, about 75% of people have Keis, and some people (such as Suzuki Chairman Osamu Suzuki) say that forcing higher taxes is akin to bullying the poor. Stuck between a rock and a hard place, it’s too soon to tell if the Kei will be forced off the Japanese roads for good or if the little fighter has what it takes for another championship.