Japan seeks to squelch its popular tiny cars

Written by New York Times | Shinshiro (Japan) | Updated: Jun 10 2014, 17:16pm hrs
Toshie Yamadas kei, with its pint-size engine and tiny wheels, looks more like a Fisher-Price toy car than a regular truck. But dont underestimate her Nissan NT 100 Clipper microtruck. At a recent farmers market, where she sells orchids from her flower farm here in central Japan, she loaded up a mountain of crates, buckets and a folding table before hopping in and zipping away.

In these parts, keis are definitely the No. 1 car, Yamada said. Big cars are too much of a hassle.

As farmers trucks, family cars, delivery vans and even tiny cafes-on-wheels, keis are everywhere in Japan. They are more popular than ever, thanks to the countrys high petrol prices, a preferential tax system and an uneven economic recovery that have made the wee cars enticing value propositions.

Keis have terrific fuel economies that rival the Prius, but they sell for half the price. Last year, a record 40% of all new cars sold in Japan were keis.

But industry and government officials are increasingly worried that these micro-vehicles have become a distraction for the nations automakers still bastions of the Japanese economy and are moving to wean drivers off them. In April the government took what its critics charged was a hard-line route. Kei drivers were hit with a triple whammy of a higher sales tax, higher petrol tax and higher kei car tax, the last of which the government raised by 50%, sharply narrowing their tax difference with regular-size vehicles.

We need to rebalance our priorities, Yoshitaka Shindo, the minister for internal affairs, said ahead of the tax increase.

Though made by some of Japans biggest automakers, including Nissan, Honda, Suzuki and the Toyota subsidiary Daihatsu, the kei pronounced like the letter K is not manufactured for export, largely because of its small size and lack of sufficient safety equipment. The engines are limited by law to just 0.66 litre, similar to an engine of a mid-sized motorcycle. Even Fords smallest car, the Fiesta subcompact, has a substantially larger


That means much of the research and development that go into kei models is wasted, officials warn. Producing kei cars just for domestic drivers also hurts automakers efforts to achieve economies of scale, which has become increasingly important in an era of cutthroat global competition.

As with other big automakers, Japanese car manufacturers are using the same basic components to build a wide range of models. Servicing a niche, Japan-only market is a luxury that Japanese automakers increasingly cannot afford, some government officials argue.

Generous tax breaks on kei vehicles, a vestige of postwar policies that encouraged Japanese to ditch their scooters and hand-drawn carts for cars, are also becoming a drain on government coffers. And kei cars have become a perennial thorn in trade talks between Japan and other car-producing countries, like the US and Germany, which say Japans unique tax breaks and restrictions for keis protect domestic automakers from foreign competition. More than 90% of cars sold in Japan are Japanese.

For years, the kei was the peoples car in Japan. But now its role is over, said Mitsuhisa Yokoyama, an analyst at SC-ABeam Automotive Consulting, an advisory firm based in Tokyo. The distinction no longer makes sense.

But the push to move beyond kei cars, which the government used to promote a car culture in Japans lean postwar years, is being hurt by the success of that policy. Simply put, the Japanese love their keis.

Thats especially the case in rural regions, like Shinshiro, where lower incomes and sparse public transportation systems have made the tiny cars a necessity. Here in Shinshiro, an estimated three-quarters of households own a kei car; that proportion is close to 100% in some parts of the country, according to the Japan Light Motor Vehicle and Motorcycle Association, an industry trade group.

Raising taxes on kei cars resorts to bullying the weak, Osamu Suzuki, chairman of Suzuki Motor, a major manufacturer of kei vehicles, said at the introduction of a new kei truck last year.

The popularity of keis is also increasing among young city dwellers, who have been hit hardest by Japans decades of slow income growth. About 26% of kei drivers last year said they had downsized from a standard car, according to a survey published in April by the Japan Automobile Manufacturers Association, a trade organisation.

Keis have also become an important mode of transport for Japanese women, who make up an estimated 65% of kei car drivers, according to the manufacturers association. Women in Shinshiro said that their husbands drove standard-size cars, but that their households would struggle to buy and maintain a second standard car.