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Tiny cars eating up Japanese auto market

With tiny pricetags to match, these darlings are the No. 1 selling cars in the nation of Hello Kitty

AP , TOKYO

Japanese minicars pass by the Kabuki Theater in downtown Tokyo on Monday, June 25, 2007. Japanese car makers are once again proving that smaller sells big. After pioneering first the compact, then the subcompact, the country's auto companies have now gone to the next step with so-called ``minicars,'' a new breed basically putting a motorcycle-sized engine on four wheels.

PHOTO: AP

Japanese carmakers are once more proving that small sells big.

After first pioneering the gas-sipping compact, then subcompact, the country's auto companies are scoring again with another downsizing -- the so-called "minicar."

Tiny, cheap and fuel-efficient, these minicars are essentially motorcycle-sized engines on four wheels. But demand for these runty runabouts is anything but petite. Last year, minicars racked record sales in Japan and now account for more than a third of all new cars sold annually here. The automakers have no immediate plans for mass export of the minicars, but some analysts predict they may eventually catch on in developing economies like India and China.

At a time of soaring oil prices, it's little surprise Japanese drivers are turning to more wallet-friendly rides, just as Americans are abandoning their lunky sport utility vehicles. But perhaps only in a country famed for its "small-is-beautiful" culture of pocket electronics and bonsai trees could the trade-ins be so diminutive.

Known as kei or light, cars in Japanese, minis are limited to an engine size of up to 660ccs -- less than half the size of a Honda Civic -- and restricted by law to being no bigger than 3.4m long and 1.5m wide.

The first mini dates back to poverty-stricken post World War II Japan as a rattletrap people's car for those who couldn't afford "real wheels." They never really went away, but only recently became popular again, largely due to improvements in technology, styling and looser size restrictions on cars. Today's generation stretches the limits of engineering and styling, with models sporting four-wheel drive, satellite navigation, antilock brakes and even turbocharging.

"They used to be sold as cheap cars," said Kurt Sanger, an auto analyst for Macquarie Research in Tokyo. "Now they are actually decent cars that just happen to have a wimpy engine in them."

DISMAL MARKET

Japan's minicar boom is the silver lining of an otherwise dismal domestic market. While Japanese automakers have marched from one success to another overseas, sales at home have slumped for three-straight years -- hurt by the country's shrinking population and a trend of increased urbanization.

Minicar sales, however, have been climbing since 2004 and jumped 5.2 percent to a record 2.02 million vehicles last year. And surprisingly, it's not the big names like Toyota or Nissan riding the tide, but second-tier players once dismissed as also-rans, like Suzuki, Daihatsu and Mitsubishi, that locked up the niche market.

ADVANTAGES

Price is a big factor. Minicars cost around just US$10,000 and get tax breaks from the Japanese government. Then there's the savings from fuel efficiency that hits 47mpg (19.8kpl) -- a boon in a country where gasoline sells at about US$4.75 a gallon (US$1.25 per liter).

They are popular in crowded cities because they are easy to park, and a hit in less affluent rural areas where public transportation is limited.

Minis also pay cheaper registration fees and taxes than regular cars, noted Masa Ogawa, a managing director for JD Power Asia Pacific, an automotive consulting company. The basic flat tax on a minicar can run around US$96 a year, compared with more than US$830 for high-end performance cars.

Yet the class got its biggest boost in 1998, when government loosened restrictions on minicar sizes, expanding the overall dimensions to 3.4m by 1.5m, from 3.3m by1.4m.

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