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Japan Seeks to Squelch Its Tiny Cars Japan Seeks to Squelch Its Tiny Cars
(3 months later)
SHINSHIRO, Japan — Toshie Yamada’s “kei,” with its pint-size engine and tiny wheels, looks more like a Fisher-Price toy car than a regular truck. But don’t 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. SHINSHIRO, Japan — Toshie Yamada’s “kei,” with its pint-size engine and tiny wheels, looks more like a Fisher-Price toy car than a regular truck. But don’t 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,” Ms. Yamada said. “Big cars are too much of a hassle.”“In these parts, keis are definitely the No. 1 car,” Ms. 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 country’s high gasoline prices, a preferential tax system and an uneven economic recovery that have made the wee cars enticing value propositions.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 country’s high gasoline 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 percent of all new cars sold in Japan were keis.Keis have terrific fuel economies that rival the Prius, but they sell for half the price. Last year, a record 40 percent of all new cars sold in Japan were keis.
But industry and government officials are increasingly worried that these microvehicles have become a distraction for the nation’s 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 gasoline tax and higher kei car tax, the last of which the government raised by 50 percent, sharply narrowing their tax difference with regular-size vehicles.But industry and government officials are increasingly worried that these microvehicles have become a distraction for the nation’s 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 gasoline tax and higher kei car tax, the last of which the government raised by 50 percent, 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.“We need to rebalance our priorities,” Yoshitaka Shindo, the minister for internal affairs, said ahead of the tax increase.
Though made by some of Japan’s 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 liter, similar to an engine of a midsize motorcycle. Even Ford’s smallest car, the Fiesta subcompact, has a substantially larger engine.Though made by some of Japan’s 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 liter, similar to an engine of a midsize motorcycle. Even Ford’s smallest car, the Fiesta subcompact, has a substantially larger engine.
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.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.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 United States and Germany, which say Japan’s unique tax breaks and restrictions for keis protect domestic automakers from foreign competition. More than 90 percent of cars sold in Japan are Japanese.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 United States and Germany, which say Japan’s unique tax breaks and restrictions for keis protect domestic automakers from foreign competition. More than 90 percent of cars sold in Japan are Japanese.
“For years, the kei was the people’s 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.”“For years, the kei was the people’s 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 Japan’s lean postwar years, is being hurt by the success of that policy. Simply put, the Japanese love their keis.But the push to move beyond kei cars, which the government used to promote a car culture in Japan’s lean postwar years, is being hurt by the success of that policy. Simply put, the Japanese love their keis.
That’s 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 percent in some parts of the country, according to the Japan Light Motor Vehicle and Motorcycle Association, an industry trade group.That’s 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 percent 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.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 Japan’s decades of slow income growth. About 26 percent 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 organization.The popularity of keis is also increasing among young city dwellers, who have been hit hardest by Japan’s decades of slow income growth. About 26 percent 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 organization.
Keis have also become an important mode of transport for Japanese women, who make up an estimated 65 percent 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.Keis have also become an important mode of transport for Japanese women, who make up an estimated 65 percent 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.
“I don’t know what I’d do without my kei,” said Yui Shirai, who relies on her Tanto, made by Daihatsu, to drive to her job at her parents’ tea farm. Her husband, Takuya, drives a standard-size Suzuki. Ms. Shirai said that they might not be able to own a second car — and she might not be able to work — if not for the low cost, low taxes and low fuel needs.“I don’t know what I’d do without my kei,” said Yui Shirai, who relies on her Tanto, made by Daihatsu, to drive to her job at her parents’ tea farm. Her husband, Takuya, drives a standard-size Suzuki. Ms. Shirai said that they might not be able to own a second car — and she might not be able to work — if not for the low cost, low taxes and low fuel needs.
The new kei taxes are feeding into a debate over what some Japanese see as a growing gap between haves and have-nots under Prime Minister Shinzo Abe’s economic reforms. Critics charge that the big measures Mr. Abe has pushed so far — raising taxes, stoking higher oil prices and nudging up inflation — have hit poorer Japanese the hardest.The new kei taxes are feeding into a debate over what some Japanese see as a growing gap between haves and have-nots under Prime Minister Shinzo Abe’s economic reforms. Critics charge that the big measures Mr. Abe has pushed so far — raising taxes, stoking higher oil prices and nudging up inflation — have hit poorer Japanese the hardest.
Almost 20 percent of kei owners surveyed by the automobile manufacturers’ association said they would consider giving up their cars altogether because of higher taxes, while 10 percent would upgrade to standard cars. “The burden appears to be heaviest for families with children, and for young people with low incomes,” the survey said.Almost 20 percent of kei owners surveyed by the automobile manufacturers’ association said they would consider giving up their cars altogether because of higher taxes, while 10 percent would upgrade to standard cars. “The burden appears to be heaviest for families with children, and for young people with low incomes,” the survey said.
Pain from the higher kei taxes is also being felt unevenly across the auto industry. Japan’s smaller carmakers, which rely more on kei car sales, have complained bitterly that raising kei taxes hits their own bottom lines, endangering jobs. Suzuki, for example, has said that it expects kei sales to slump this year because of the higher taxes. It was one of only two carmakers that did not give raises to its employees this year.Pain from the higher kei taxes is also being felt unevenly across the auto industry. Japan’s smaller carmakers, which rely more on kei car sales, have complained bitterly that raising kei taxes hits their own bottom lines, endangering jobs. Suzuki, for example, has said that it expects kei sales to slump this year because of the higher taxes. It was one of only two carmakers that did not give raises to its employees this year.
Suzuki also argues that manufacturing keis offers insights into other parts of its business. It applies some of the kei technology, for example, to small cars that it sells in India, a market where it has a sizable share.Suzuki also argues that manufacturing keis offers insights into other parts of its business. It applies some of the kei technology, for example, to small cars that it sells in India, a market where it has a sizable share.
And Suzuki has been aggressively upgrading its keis, transforming them from cut-rate cars with minimal trappings. Now, Suzuki’s best-selling Wagon R microcar features slick seats, a small lithium-ion battery that can capture energy when the car slows down, and an advanced, radar-supported braking system. These are technologies that are applicable across all its models, Suzuki says.And Suzuki has been aggressively upgrading its keis, transforming them from cut-rate cars with minimal trappings. Now, Suzuki’s best-selling Wagon R microcar features slick seats, a small lithium-ion battery that can capture energy when the car slows down, and an advanced, radar-supported braking system. These are technologies that are applicable across all its models, Suzuki says.
“In the past, people used to say they’d settle for a kei. Now they say they desire a kei,” said Aritaka Okajima, a Suzuki spokesman.“In the past, people used to say they’d settle for a kei. Now they say they desire a kei,” said Aritaka Okajima, a Suzuki spokesman.
Still, the future is tough for Japan’s microcars. Daihatsu’s president, Masanori Mitsui, warned on April 28 that the automaker expected overall kei sales in Japan to shrink by some 500,000 vehicles over the next two years, from 2.23 million vehicles last fiscal year to 1.7 million in 2015.Still, the future is tough for Japan’s microcars. Daihatsu’s president, Masanori Mitsui, warned on April 28 that the automaker expected overall kei sales in Japan to shrink by some 500,000 vehicles over the next two years, from 2.23 million vehicles last fiscal year to 1.7 million in 2015.
Takeshi Suzuki, a Shinshiro retiree who sells coffee from the back of his Mitsubishi Minicab microvan, said raising taxes on keis would quash Japanese entrepreneurism. In a space just over 11 feet long, under five feet wide and about five feet high, Mr. Suzuki has squeezed in an industrial coffee grinder, electric generator, ice box, paper cups and a Cimbali espresso machine.Takeshi Suzuki, a Shinshiro retiree who sells coffee from the back of his Mitsubishi Minicab microvan, said raising taxes on keis would quash Japanese entrepreneurism. In a space just over 11 feet long, under five feet wide and about five feet high, Mr. Suzuki has squeezed in an industrial coffee grinder, electric generator, ice box, paper cups and a Cimbali espresso machine.
“Keis are the working man’s friend,” he said. “How could they do this to us?”“Keis are the working man’s friend,” he said. “How could they do this to us?”