By on May 30, 2013

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Today’s Nikkei [sub] puts forth an interesting thought: Dependence on big pick-ups distracts the Detroit 3 on a global basis. Now, tiny kei cars could do the same to the Japanese.  Writes the Nikkei:

“Part of the reason the Big Three U.S. automakers lost their international dominance is because they lagged foreign carmakers in implementing global strategies by clinging to large pickup trucks, which only do well in the U.S.”

“There is a concern that an excessive focus on minicars will lead to the “Galapagosization” of Japan’s auto industry.”

Minicars, or “kei” cars are a rapidly growing segment in an otherwise stagnant Japanese auto market. In April, keis took 40 percent of the Japanese market. Elsewhere: Zero. Keis are a Japanese phenomenon, and nearly non-existent outside of Japan.  Says the Nikkei:

“The Maruti 800, which was produced by Suzuki for the Indian market based an older design for its Alto and was wildly popular, is perhaps the sole exception. But the car was equipped with an 800cc engine for the Indian market because a 600cc model was seen as underpowered.”

In trade talks, negotiators have criticized Japan for giving special tax and insurance treatment to minivehicles. But, says the Nikkei:

“Japanese carmakers may find that relying excessively on a protected domestic market poses a bigger risk than opening up to the world. Automakers should bring their advanced minicars to other countries, such as emerging markets, to show that their vehicles are not products of the Galapagos syndrome.”

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52 Comments on “What Keis And Big Pickups Have In Common: A Galapagosization...”


  • avatar

    This reminds me, what was the last car platform that Big 2.5 have developed on their own? I remember the Chrysler’s Neon, both the Gen1 and PL2K. It came from the “small car product group”, which previously developed Viper. Once PT Cruiser rolled out, the group was dismantled, so much so that the future of Viper itself was in doubt. But it’s impossible not to notice that platforms always originate outside of U.S. these days, from big Volvo P2 to Euro Focus. All the Fiestas and the like which were international from the start, so they go without mention. And gosh, look at commercial vans! I don’t know if it’s fair to blame “the evil gas-guzzling truck”.

    • 0 avatar
      sportyaccordy

      To be totally fair, the big Japanese mainstreamers have not really been rolling out completely new platforms. The Accord is new, but the one before it had ties to the body released in ’98. The Camry is on its ~3rd big refresh. The Altima is on its second. The Corolla is at least 10 yrs old. There’s really no need to roll out completely new platforms when a perfectly good one already exists, that can remain competitive w/a little growth and tweaking.

      Big 2.5 just need to work on getting their cars’ weights down, and stop playing the “ours is bigger” game. The Neon thrived because it was right in the mix with the Japanese, but also able to be priced dirt cheap due to the skyrocketing yen. W/Japanese manufacturers basically completely committed to American plants that advantage is long gone.

      • 0 avatar

        This is not what I’m talking about. True, platforms do not need to be brought in for every refresh, but the thing is, when they do, they only migrate in one direction. Why is that, and is it a problem?

    • 0 avatar
      jimbob457

      Not to be disrespectful, but the Neon didn’t exactly set the world on fire when it was new. Now known to be a vehicle with a proven life of only 100k miles, it, imo. flirts with POS status. It platform mate, the PT Cruiser, outsold it 2/1, imo. because of its cute, retro styling.

      I know about this because I once bought a slightly used Candy Apple Red PT Cruiser because of its nostalgic styling and drove it to 110k miles. Toward the end my long-time mechanic advised me to dump it because, mechanically, it was worn out. All my dutiful maintenance had gone for nothing.

      Even so, it was not a truly bad car, although very uncomfortable to drive on trips of more than 200 miles and a little underpowered for my taste. I took the back seat out and used it as a hauler on occasion. Who needed a small pickup truck?

      If it were better designed mechanically, I would be tempted, even today, to buy one, restore it, soup up the engine a little, install an aftermarket driver’s seat and cruise it up and down the road.

      • 0 avatar
        rushn

        Where did you get the 2/1 number? PT Cruiser sold less than all Neons in 1999 and 2000 and barely more in 2001 and 2002.

        • 0 avatar
          SherbornSean

          Pete makes a great point, which I think may have gotten lost in the shuffle. Put simply:

          Detroit has lost the capability to engineer a volume car platform in the US.

          It’s a shocking and sad indictment of American engineering. But apparently true.

        • 0 avatar
          jimbob457

          I think most of my data came from Wikipedia and other sources found on Google, including some PT Cruiser-oriented websites.

          As I recall, the PT Cruiser eventually sold about a million units (mostly in North America and some in Europe), and the Neon about 500,000. Remember the PT Cruiser sold the platform at least fairly well for ten or eleven model years. The second generation Neon only did so for six years.

          I have no comprehensive data, but I would bet the percentage of PT Cruisers sold retail was much higher than for the Neon.

    • 0 avatar
      mkirk

      If Ford of Europe or Holden develop a platform, it is still a Ford or GM platform.

  • avatar
    mike978

    At least selling big trucks gave I would assume more profit per vehicle and a greater absolute volume so dependence on them is not as bad as dependence on Kei cars.

  • avatar
    Felix Hoenikker

    This is the problem facing any company that gets the majority of if profits from one or two products. Most never break out of the mold. The book “The Innovator’s Dilemma” by Clayton Christensen explores this subject in a very readable way.

    • 0 avatar
      DC Bruce

      Yes, if I recall it correctly, the basic principle is “If a company figures out a successful formula, it has every incentive not to abandon that formula for something else . . . until the formula no longer works.”

      The situation with the “Detroit 3″ is more complex because, since the late 1960s, Detroit has — with considerable success until its collapse in 2008 — managed to find ways to insulate itself from foreign competition. So, it’s not that the Detroit 3 were so successful with pickup trucks; it’s that they successfully insulated themselves from foreign competition and the pickup truck is a more typically North American vehicle, a function of the unique demands of that marketplace.

      Just like the kei cars are a function of the unique demands of the Japanese marketplace.

    • 0 avatar
      RobertRyan

      @Felix Hoenikker,
      No not the bulk of their profits in the case of the Kei’s, but are basically unique to that market and a substantial proportion of that market. The US Pickups are a major component of the NA market and make rhe bulk of their profit.

    • 0 avatar

      Christensen’s thesis was somewhat different, as I understand. The Great North-Eastern Migration rule permits breaking the mold towards better products. The only thing companies cannot do is to engineer new, less expensive “value networks”. So, if Kei cars are kept _cheap_, a 3rd string automaker like Mitsubishi should be able to stage a migration into higher value products. Of course Mitsu won’t, specifically, but Hyundai just did (albeit not staring with kei cars). We may even see someone like Daihatsu making a comeback. According to Christensen, anyway.

      You know what’s an interesting illustration of Christensenism at work? Scion. Toyota tried to do the right thing by establishing a separate brand, but it was torpedoed by not making fully independent. Once Toyota decided to sell Scions out of existing dealerships, the game was over according to the retail scenario that Christensen outlined (I forgot the exact store, was it Sears?).

  • avatar
    niky

    Wait… that can’t be right… anti-Detroit Bertel is writing an article critical of the almight Japanese? What is this world coming to?!?

    On a more serious note… there’s something there. While developing markets love small, cheap cars, we aren’t getting Keis. In the same vein as US market cars, the engines dictated by local conditions and market regulations are not the ones the global market wants.

    Even 800cc is seen as too small outside of India… the more popular microcars sport 1,000 – 1,200cc motors.

    It’s a shame. I’d love to have the opportunity to drive newer Keis… especially the vans.

    • 0 avatar
      Summicron

      I’d love to buy a new, Americanized, factory warrantied and dealer supported kei truck. The bed types on them are ingenious, dump, tilt, drop-down side panels…etc.

      How would one with, say, a 1.6 liter engine for the stretch of highway between you and Home Depot NOT be a perfect homeowner’s tote? And with Japanese build quality.

      Really, with all American trucks morphing into gigantic gas and space hogs, impossible to access bed contents from the side, isn’t a huge market being ignored?

      • 0 avatar
        Sigivald

        I’m thinking the answer is “no”.

        Ford killed the Ranger because it wasn’t selling.

        The market for a Kei truck is, I think, far smaller than you believe.

        (Who needs a dump bed that size? Almost nobody! The people who do buy a Gator or something, and don’t pretend it’s a freeway vehicle.

        Get a Transit Connect. There we go.)

        • 0 avatar
          Summicron

          Nah, it’s easy to get a lifted, 4WD kei truck with big meats in other markets. Even here with used ones registered as ATVs. Can’t do that with a Transit Connect and this is snow country.

          And I only said you could drive freeways if the engine were Americanized to around 1.6L.

        • 0 avatar
          RobertRyan

          They work well in the medieval cities of Europe and Japan. Very narrow streets that three people abreast would have a hard time walking.

          • 0 avatar
            Summicron

            They’d also work well taking a load of black dirt or decorative gravel from the pile on my driveway to the back yard. It was kinda hairy squeeking my 1/2 ton between the garage and neighbor’s fence.

          • 0 avatar
            Turkina

            Like… Philadelphia or Boston? ;)

        • 0 avatar
          niky

          The US Ranger didn’t sell because they didn’t bother to update it. The last American Ranger’s sales dropped (predictably) around the seven year mark, when Ford should have introduced an all-new one.

          Ford basically sold the same truck for over a decade, finally facelift it… and then sell the same thing, again… for fourteen years. In which time the global Ranger went through a model change, then got a major overhaul, and then was dropped for a completely redesigned Ranger.

          -

          Though I agree… the market in the US is not suited to Kei trucks… simply because they would get “horrendous” gas mileage on the highway… as they’re simply not geared to be driven at 80 mph for long distances.

          • 0 avatar
            doctor olds

            …and they didn’t bother to update it because it didn’t sell! Sort of a catch 22.

      • 0 avatar
        Roland

        I would definitely have bought a kei truck had they been available in my market new and with a dealer network.

        So I ended up buying a Ford Ranger in its final model year, since it was the smallest true truck available to purchase new. I like it so far–no complaints, except I’ll never buy a black vehicle ever again.

        But I would have been even happier to buy something even smaller, cheaper and more fuel efficient.

        In Vancouver, one can obtain some little Japanese minivans and even a few little cab-over-engine pickups, but they’re all right-hand drive and at least fifteen years old, to meet Canadian import regulations. Nevertheless I see some of them every day. Those little vans have fantastic space efficiency, and the COE pickup parked a block from my home actually has a one ton suspension.

        BTW a Transit Connect cost more than a base Ranger. The Transit Connect also had poorer ground clearance, which disqualified it when I was shopping.

        CUV’s also lack ground clearance. The SUV’s are better, but again, they’re all more expensive than a base Ranger. Besides, I didn’t need 4WD, I preferred 2WD with good ground clearance.

        When I was shopping, the SUV’s were all overloaded with stupid unnecessary crap, too. For example, in 2011 one couldn’t buy a Suzuki Grand Vitara without air conditioning and power windows. WTF?

        What happened to the basic little Samurais and Sidekicks they used to sell? At least in a Vancouver climate, the Sidekick and its various GM-badged siblings endured quite well–still lots of them on the road here. I would have liked something like that when I was shopping a couple of years ago, but nothing like them was being sold new.

        Hopefully, in the not-too-distant we’ll get a selection of basic vehicles imported from abroad. Also hopefully the Chinese quality will have gotten better.

        About the Ranger, right to the end it seemed to sell not badly here in the “Lower Mainland” of British Columbia. There are at least half a dozen of them parked within two blocks of my home, counting a couple of Ranger -based Mazda B-series.

        • 0 avatar
          Summicron

          Completely agree with you on every point.

          My view of the truck market is that current phenomenal truck sales are heavily due to buyers who have absolutely no intention of ever using them as trucks. They are instead a form of self-defense for today’s murderous traffic and disintegrating road surfaces. Ditto for large SUVs.

          The overwhelming popularity of highly optioned crew-cab pickups shows, I think, the new role of full-sized trucks as up-armored family sedans. The vestigial bed that’s almost facetiously tacked onto the rear of these things is a pretty eloquent statement that “I only haul people”.

          Well and good, manufacturers obsessing on that market only makes sense here in the US. But it doesn’t mean that the market for small, tough and simple pickups went away. It’s just being ignored as small potatoes.

    • 0 avatar

      The Ranger is really being discussed as a Kei truck? Wow…

      • 0 avatar
        niky

        Not really. The contention is that since a truck as “small” as the Ranger didn’t sell very well before it died off (again, not entirely due to its size), the even smaller Kei trucks would not do well.

  • avatar
    challenger2012

    I see in this article by Mr. Schmitt this statement,” Japanese carmakers may find that relying excessively on a protected domestic market poses a bigger risk than opening up to the world”? I have seen numerous articles in TTAC and Mr. Schmitt that the Japanese Auto Market has no barriers is open and is not protected. There seems to be a conflict here. I have written several times asking why if the Japanese Auto Market is so open that not a single foreign auto maker builds in Japan.

    • 0 avatar
      RobertRyan

      There is no barrier and the Japanese carmakers are not relying on Kei cars. The Japanese homemarket is, that is the thrust of this article. Like the Galapagos, these are Automobile species unique (Kei and US Pickups) unique to a specific country.

      • 0 avatar
        challenger2012

        Mr RobertRyan In the article is this statement,” ,” Japanese carmakers may find that relying excessively on a protected domestic market poses a bigger risk than opening up to the world”? Protected Domestic Market means Protected Domestic Market, how do you read this as no barrier? Also, tell me why not a single foreign car maker builds in Japan, not BMW, VW, Audi, MB, Ford, GM, Kia/Hyundai, Fiat/Chrysler etc. yet you see plants from all of these makers in all over the world. Why has not even on foreign car maker thought to build in Japan? Read Detroit’s Collapse: The untold story” for the answers.

        • 0 avatar
          RobertRyan

          @challenger2012
          For a carmaker to BUILD in Japan they would need rocks in their head. The Japanese have moved a lot of their production overseas.Even for the Japanese due to the high Yen it is is very expensive to build there. Tradition and Japanese Unions makes sure they still build cars their.That is why the Japanese have been busy doing a lot of “quantitative easing” of their currency

          • 0 avatar
            challenger2012

            Mr. Robert A protected market is a protected market. And this article states the Japanese auto market is protected. Thus, unless you have facts to back your statement, your fantasies don’t’ counter my facts. Also, if a foreign auto makers would have rocks in their head to build in Japan, Japanese makers have been doing this for years. Do they have rocks in their heads? It is obvious that in the 3rd largest auto market in the world, that there must be some reason all foreign car makers have not chosen to build in Japan. I would suggest reading an article called Detroit’s Collapse: The Untold story for another point of view. You might get a different perspective.

          • 0 avatar
            RobertRyan

            @challenger2012,
            Take it one step at a time. Yes when the Yen was low no problems building in Japan for the Japanese, now it is.
            Why BUILD in Japan and basically fight over a saturated market, where all niches are filled by the Japanese? A market that prefers its own product? Japanese prefer Japanese goods and that is a HUGE barrier for any manufacturer.
            If the US bought only US made items and I am taking about 100% US made, the whole issue of vast numbers of imported and US built Foreign owned Automobiles would not exist.
            The Japanese buy some Halo cars from outside Japan but that is it. Imports of these is very low indeed..i.e Mercedes, BMW, Ferrari etc

      • 0 avatar
        doctor olds

        There are barriers, just not in the form of tariffs. The empirical evidence is the tiny market share of the best selling imports and the segment in total.

  • avatar
    L'avventura

    Japan’s kei-cars could avoid “Galapagosization” (and perception of market protection) if they took off several ridiculous restrictions, such as the 660cc/63hp engine limit. Japanese automakers to meet that regulation usually resort to turbo-charging their 660cc 3-cylinder engine to only have it limited to 63hp.

    Its an odd combination of displacement regulation and power limit that basically necessities expensive additions like turbocharging to hit a meager limit (a high-revving 660cc have been made, and hated due to high engine noise and low-torque). A similar 800cc engine could hit that 63 hp figure cheaper and with more comfort.

    Many of these minicars could find markets in other Asian nations where fuel and space efficiency are necessary due to cramped streets and parking, as well as tiny parking spaces.

    The real advantage of having a yellow plate (kei car) is a mere 2% vehicle excise tax(3% vs 5%). Japan still taxes on weight and size, hence an official “Kei” designation only limits Japanese exports of mini-cars: its “Galapagosization” that only hurts Japan.

    You can make the argument that “kei” cars actually benefit foreign rivals as it keeps Japanese cars from being exported and forces Japanese companies to concentrate resources a car lineup that can’t compete in foreign markets.

    • 0 avatar
      George B

      I agree. Simply allowing a larger engine displacement for naturally aspirated engines would allow Kei cars to be both less expensive and more suitable for other markets. Turbocharged engines loose power in the heat and Kei cars don’t have a lot to spare. Maybe there is an opportunity to harmonize some of the requirements between Japan and India.

  • avatar
    SoCalMikester

    Toyota knows its iQ isnt doing great here, and I dont think anyone buys Smart cars anymore. Thats enough to dissuade them. Id gladly consider a toyota kei van or trucklet if it was offered with the corporate 1NZ-FE

    • 0 avatar
      TW4

      Sales figures of the Smart and Scion iQ are not a good corollary for the underlying concept of superminis. Both Daimler and Toyota built the Smart and iQ models as engineering exercises, not to function as supermini basic transportation. The Smart is built around the concept of dust-to-dust energy usage, an engineering endeavor that consumed a good deal of resources to suppress overall energy costs. The Smart’s price tag and the product are not particularly impressive, though its abstract green credentials are noteworthy. The Toyota iQ is a sort of Supermini halo vehicle which Toyota used as an engineering exercise to see how much functionality they could squeeze into a 10ft unibody. Toyota mass produced the iQ because they were proud of the engineering, despite the impractical cost of some engineering solutions. The price tag was too large for lovers of small things, and the vehicle was not targeted at any particular market. Scion branding in the US was sales kryptonite.

      If Suzuki had managed to bring the 1.0L 7th-gen Alto to the United States for a sub-$10K price, and they were able to brand it as the car for global citizens “in the know”, I think it would have sold reasonably well. I suppose it could still happen as a Pixo or a Carol or something.

  • avatar
    gslippy

    Exhibit C would be the dominance of diesel engines in Europe, but not in the US.

    With the exception of emerging markets like India/China, the kei cars won’t get much traction anywhere else. Federalizing them in the US is unrealistic, there’d be no profit in such little cars, and also no sales. Even the most congested city in the US couldn’t justify the need for such a vehicle.

    And here’s another thought – the US and Japan are such large markets that their home mfrs don’t really need to sell these vehicles elsewhere.

    • 0 avatar
      VA Terrapin

      The dominance of diesel light passenger cars in Europe is mainly because of the European Union’s attempt to abide by CO2 reductions as spelled out in Kyoto Treaty Protocols. I can’t think of any other place, other than India, where diesel light passenger cars are such a big deal. Certainly not in North America, China, Japan or South Korea. In Australia, diesel light passenger cars are gaining, but they still lags behind gas light passenger cars.

      • 0 avatar

        I don’t think any of that has to do with Kyoto. Diesels were selling well in Europe long before Kyoto, for one thing. Also, Europe never even came close to meeting Kyoto targets. Their rules for diesels are pure robbery of consumers and the resulting regs accidentially making diesels slightly less expensive, while still horribly expensive. The mechanics of it happening are being covered up by the anti-carbon hysteria, but they are still there.

    • 0 avatar
      VA Terrapin

      I don’t see galapagosization having much, if any, effect on American or Japanese auto companies. Big pickups don’t seem to have hurt GM in China, nor do they seem to have kept the Ford Focus from being one of the top selling cars globally. As for Japanese auto companies, kei cars haven’t kept Japanese models from having 3 of the top 4 selling midsize sedans, nor have they kept Toyota from regaining its crown as the world’s biggest auto company.

    • 0 avatar
      Beerboy12

      Specific cars for specific markets that sell well are not a bad thing at all in the short term but the dependency is a long term risk. The longer the investment the higher the risk. A globally acceptable car does not carry that risk because when the market collapses in one area you just shift sales elsewhere.

  • avatar
    Eric 0

    I was in Japan over the winter for several weeks, mostly in the countryside. In my mother-in-laws’s neighborhood Keis were ubiquitous. I would say 95% The main reason is that once you get off the main highways, Japanese roads are much narrower than even European roads, and their “curbs” are rain gutters about a foot wide and a foot deep. If you put a wheel in one you are calling a tow truck. Cars that we think of as “small” like a BMW 1 series or Prius appear and are huge in this environment. Two Kei cars meeting on a country road can pass each other easily. If either car is a regular compact car, that person is going to back up until there is a spot where both cars can pass. And those gutters are even easier to hit driving backwards.

    Once you get into the cities where there are wide modern roads, the percentage of Keis drops to around 20%. I even saw some big detroit iron rolling on crazy spinner rims, which my wife assured me could only be yakuza cars. Like America, and the Galapagos, Japan is a unique geography, and her cars have evolved to thrive in it, regardless of their global marketability.

  • avatar
    manu06

    I’ve actually have seen quite a few Keis over here. They have become very popular with farmers and they are being
    shipped over fairly cheaply priced. They get tagged in Mississippi and I don’t think they are supposed to be used on highways but I see them all over.

  • avatar
    jimbob457

    I once owned an almost kei car in the USA – the famous/infamous Daihatsu Charade. It must have been 1990, and I needed a good, reliable cheap used car to commute between Dallas and Baton Rouge on a weekly basis. As per my usual habit, I sought a GOOD vehicle that was cheap because nobody wanted it. A four cylinder luxo version (A/C and automatic tran) of the Daihatsu kei car with 12k miles at $3,500 fit the bill.

    The operative phrase is “cheap because nobody wanted it”. It proved to be a pretty good car even for a use for which it had not, in anyway shape or form, been designed. It gave up the ghost at about 110k miles. Not too bad considering I drove it like a rented mule.

    So, selling a kei car in North America has been tried. It failed. Indeed, it didn’t just fail. It failed utterly. Yet, as a former owner, I liked the product and wanted to buy another one had it been available. Replaced it with a 1990 Sterling (the model with the decent electronics) – same theory as the Daihatsu. Liked it too, but a bit too much Rover and not enough Honda.

    P.S. Isn’t Daihatsu now mostly (or entirely?) owned by one of the Japanese major car companies? Toyota?

    • 0 avatar
      Summicron

      Wiki on the Charade:

      >It is considered by Daihatsu as a “large compact” car, to differentiate it from the smaller compacts in its lineup, such as the Daihatsu Mira.<

      It appears you had the luxo-barge of kei-cars :-D

      As of 2011 Toyota owned 51% of Daihatsu and apparently source the Yaris from them. The Wiki Scion article calls Daihatsu "the hatchback division" of Toyota.

      • 0 avatar
        jimbob457

        The little Daihatsu Charade had 220cc per cylinder. The genuine kei car version had three cylinders. Some of those Daihatsu imported to the USA were of the three cylinder variety. I know this because I saw them in the sad little corners that passed for dealer showrooms when I was later shopping for a replacement for my worn out luxo-barge.


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