By on September 5, 2017

suzuki alto works rs-r

Anyone with an interest in odd cars probably has at least a passing fascination with Japanese kei cars. As a member of that small subset of enthusiasts, I have a long-held fantasy that involves owning a Suzuki Alto Works, Daihatsu Mira Turbo, Honda Today, or Honda Acty. But the closest North America ever got was the i-MiEV, which Mitsubishi stretched a few inches to comply with U.S. crash ratings — nullifying its official status as a kei.

Sure, most kei cars are utter garbage from a driving perspective, but their utilitarian quirkiness and microscopic road-presence are difficult to replicate on anything other than a moped. They’re also stupidly affordable, which is one of the reasons they’ve persisted in Japan.

However, that’s beginning to change now that their home country has begun taxing them into extinction. The miniature breed, brought to life specifically so budget-minded motorists can have a vehicle and always find parking, lost roughly 25 percent of its yearly volume since Japan targeted them in 2014 — resulting in a sudden annual deficit of nearly 550,000 pint-sized vehicles. 

If you’re wondering why Japan would go out of its way to handicap its automotive industry, it isn’t. Since the vehicles are so specialized, they’re not widely exported and thereby not particularly profitable. Australia and Europe has received the odd one from time to time, and mainland Asia gets a handful of modern-day examples (mainly in India), but no country is really begging for them.

Japan has raised gasoline and sales taxes, while also increasing the kei-car tax by 50 percent in 2014, making a them cost roughly the same to run as any other automobile with a smallish engine “We need to rebalance our priorities,” Yoshitaka Shindo, the minister for internal affairs, said ahead of the 2014 tax adjustment.

But there is a problem. The general public still loves them. Despite the massive decrease in sales over the last two years, Japanese consumers still bought 1.72 million kei cars in 2016. Their svelte figure makes city parking a breeze and, since most driving distances aren’t nearly as long as in North America, owners are happier to occupy a less-than-premium interior for the duration. The government also doesn’t require owners of the little runabouts to prove they have purchased a parking space for them, which is mandatory on larger vehicles.

The elderly are among kei’s biggest fans, having purchased the yellow-plated cars after their post-war introduction and then stuck with them. “You can manoeuvre the car even if the streets are really narrow,” 75-year-old Yoko Kojima, whose Daihatsu Tanto doubles as a van for her part-time flower delivery business, told Agence France-Presse. “It’s really easy to drive — I adore it.”
daihatsu tanto custom

Youths, who have faced similar economic perils to Western Millennials, also strongly prefer kei jidōsha over larger offerings due to their initial affordability.

Even some automakers are opposed to the idea of Japan’s self-imposed war on the little cars. Osamu Suzuki, chairman of Suzuki Motor, has been fairly outspoken against tax hike and has said the move amounts to “bullying the weak.” However, Suzuki has a more-vested interest in smaller automobiles than its rivals.

Asako Hoshino, vice president at Nissan, doesn’t believe the ultra-small economy cars will vanish from Japan’s landscape entirely but is substantially less interested in them persisting as a ubiquitous feature. “Twenty years ago, cars were a symbol of success, but that is not necessarily the case today,” he said. “The trend now is to reduce the size.”

Small-car expertise was one of the primary reasons Nissan acquired Mitsubishi in 2016. Mitsubishi currently sells numerous kei-rated vehicles on the Japanese domestic market — including the eK, which starts at roughly $9,000.

The long-term prognosis is not good, though. While the Japanese public maintains its love affair with all things tiny, the government has made it is mission to wean them off infinitesimal autos.

“I don’t see a bright future for kei cars,” Yoshiaki Kawano, an analyst at IHS Markit consultancy, explained. He then added that a consumption-tax increase planned for 2019 could further harm kei sales.

ek custom base kei car

[Images: Daihatsu, Mitsubishi]

 

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31 Comments on “Government Intervention is Intentionally Killing the Japanese Kei Car...”


  • avatar
    JohnTaurus

    “But the closest North America ever got was the i-MiEV…”

    Not so, we got the Honda N600 and Z600 in the early 1970s, before we got the Civic.

    I love Kei cars, I would love a Z600 in avocado green. For something more modern, that sweet little Honda roadster would be great. I would also take a Honda Acty truck.

    • 0 avatar
      JohnTaurus

      I just realized that my statement makes it appear that I only like Honda Kei vehicles, but that isn’t the case. I like some models from Daihatsu and Mitsubishi as well. For an example, the Mitsubishi MiniCab is a perfectly acceptable Honda Acty alternative for me.

    • 0 avatar
      2manycars

      Before the Honda we had the Subaru 360. The 360 was sold in the U.S. starting in 1968 as I recall. We even got the van and pickup versions.

  • avatar
    eggsalad

    In other news, American government regulation is intentionally killing the carburetor.

  • avatar
    Compaq Deskpro

    What’s the point? Does the Japanese government want to reduce or control the number of cars on the streets (like China) or do they want customers to buy more profitable globalized cars like Honda Fits and Nissan Micras?

    • 0 avatar
      gmichaelj

      I think the point is that the Japanese Government no longer wants resources “wasted” on car platforms that aren’t saleable globally. In years past, kei cars were a backstop for Japan’s automakers. Now, with little non-domestic competition, it would be better if Suzuki et. al. started producing *more* cars that could sell globally.

    • 0 avatar
      Guitar man

      I suspect the principal motivation is the increase in tax revenue.

      The Kei car tax subsidies were introduced with the Suez oil crisis in the 1960s and extended with the Opec crisis in 1972 to reduce Japan’s reliance on oil imports.

  • avatar
    genuineleather

    “However, that’s beginning to change now that their home country has begun taxing them into extinction.”

    Eh, the lower tax rate of the kei car class was always, effectively, a subsidy. On the plus side, from a policy perspective, there will no longer be an incentive for adhering to an arbitrary set of dimensions, displacements, etc.

    • 0 avatar
      Speed3

      So basically they were taxed at a lower rate – subsidized – and now are being taxed at about the same rate. Also insurance and gas costs have increased.

      Sounds like kei cars now have to compete on equal footing with all other cars in Japan.

    • 0 avatar
      operagost

      I love how to the left wing, taking less of people’s own money is called a “subsidy”.

    • 0 avatar
      Sam Hall

      “effectively, a subsidy”

      I wish we could be clearer with our words. A subsidy is when the government hands out cash to offset some particular good or service. This can be enacted in the form of a refundable tax credit, like EITC, or as a literal handout like food stamps. But it is not the same thing as setting differing tax rates for e.g. different categories of cars, which only affects how much money the government takes in.

      That may sound like nitpicking, but that kind of fuzziness is how we got to the point where politicians get away with using “spending cut” to mean a spending increase that’s less than what they wanted. It’s a big part of why we can’t have an intelligent discussion about public policy.

      • 0 avatar
        rpn453

        So, if Kei cars were taxed the same as other vehicles, but included a tax credit, then it would be a subsidy. But if that step is skipped and it’s simply taxed favorably in the first place so that the total taxes paid are the same as in the tax credit system, it’s not a subsidy.

        I don’t have the political sophistication to see the difference.

  • avatar
    TonyJZX

    one would assume that the Kei car is an evolutionary dead end since it has no market outside of JP so why bother?

    2ndly Kei would turn 100% EV sooner than anyone else since it would suit the Kei’s intended task… ie. glorified golf carts for urban use, home charging, low speed, no hwy ability…

    An electric Kei would suit many JP folks, have limited need for development since its really just a low speed town vehicle and Japan has decent long range transport infrastructre as it is.

    • 0 avatar
      Land Ark

      They might not have a market outside Japan, but my goodness they are EVERYWHERE in Japan. And there are a lot of people in Japan. But as is the case with any small car, in the manufacturers’ eyes, they’d rather you buy a top of the line SUV because the profit in a Kei is so small. It’s certainly not a lack of domestic demand that’ll kill the Kei.

  • avatar
    JimZ

    conclusion: governments are inherently bad, so we should be left free to shoot and kill each other in order to get what we want.

    • 0 avatar
      JohnTaurus

      Government regulations basically created the segment to begin with. Seems only fitting that they should also destroy it.

    • 0 avatar
      Rasputin

      Typical brain dead logic:
      Since I do not want the government telling me, for MY OWN SAFETY, what I can purchase, it means I want to shoot and kill others in order to get whatever I want.

      The same with the government telling me I MUST purchase a particular product for MY OWN BENEFIT. Because, of course, we are all too stupid to make & take responsibility for our own decisions. We need our betters to tell us what to do – for our own good.

      • 0 avatar
        JimZ

        you’re more than welcome to take all of the airbags and seatbelts out of your car and unplug the ABS module if you so desire. Those things are required by law because the vast majority of drivers require them to some extent, and car companies don’t have the time or resources to cater to a handful of noisy snowflakes who think they’re far better drivers than they actually are.

      • 0 avatar
        Lou_BC

        “Because, of course, we are all too stupid to make & take responsibility for our own decisions.”

        Anything in the news over the past year indicate otherwise?

    • 0 avatar
      operagost

      JimZ likes to put his straw man in the passenger seat so that he can use the carpool lane.

  • avatar

    Yeah, but the same thing happened in America – traditional American full size cars were regulated into oblivion by evil Government. How unfair. Now Americans drive the same boredom as the rest of the world. But still full size SUV somehow replaced full size cars. May be Japanese will also come up with some trick like driving tiny SUVs instead of micro cars?

  • avatar
    rpn453

    This article makes it sound like these vehicles are now being taxed more heavily than others. But I know they were essentially subsidized through favorable taxation in the past, so I’m inclined to believe that they are simply beginning to be taxed like every other vehicle in the Japanese market.

    Sounds good to me. Let them live or die on their own merit.

  • avatar
    deanst

    Very frustrating article – it would be great to have some facts. Percent changes are useful, but the absolute numbers are necessary to really understand the market. I know at one time kei cars had annual taxes of about $80 and then had a “huge” increase of 25% to $100 versus annual taxes of maybe $700 for a large or luxury car. Also, there is some difference between the taxes when purchased, which would be interesting to know. I remember at one point a big advantage of these cars was that you’d didn’t have to prove you had a parking space, which could be a huge deal / saving for some people.

    Then there is the issue of fuel economy and safety. These cars were made cheap, so fuel economy could be worse than larger cars, and the safety standards were well below the requirements demanded of other cars – you wouldn’t want to crash in these things.

    And lastly there is the issue of trade. Foreign firms and countries have long complained that this class of car is essentially a form of protectionism as nobody else makes them. If this class of car is disappearing, I’m surprised nobody has blamed / given credit to trump!

    The bottom line seems to be that there may have been some reasons for these cheap cars years ago, but Japan has been an advanced economy for a long time now, with no need for cheap, unsafe, inefficient cars created by government fiat. Level the playing field, standardize all safety and tax regulations, and let the consumer decide.

  • avatar
    Shortest Circuit

    A Honda N-Box with the Mugen pack would be an awesome-looking city runabout.

  • avatar
    Jeff S

    I like this size of a car for the inner city or for crowded areas. These could be updated with some better safety features but it is nice have something smaller to park in tight spaces and more efficient use of interior space especially that Tanto pictured above. I would not want to drive these on the interstate with big trucks but I can see advantages in an urban area. I doubt these are that inefficient since they weigh less and smaller engines.

  • avatar
    rocketrodeo

    As fun and practical as these look, if your size is anything like mine (6-2, 200 lbs), you will. not. fit. We had a Mitsubishi microtruck at work–the rear seat cushion is bolted to the back of the cab and I was wedged between it and the wheel, knees under it and the dash. It was good for shuttling packages and test equipment between buildings and that was about it. We have a kei collector here in town and he has a rather impressive collection of Japanese fire trucks, Honda Beats, and various other microcars. With rare exceptions, I can’t even sit in them, much less drive them.

    I once owned, and comfortably drove, a Bugeye Sprite, though top-down was pretty much a requirement. It was a limo in comparison.

  • avatar

    Daihatsu Copen!

    No roof
    No cubic inches
    No problem


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