Feb 02, 2021 () - Japan’s "kei" vehicles known for their affordability and small engines, face a potentially existential threat as the country leans on automakers to go electric as part of its net-zero emissions goal.
"Kei" means "light” in Japanese, and the category makes up about a third of new domestic automobile sales. They’re a popular means of transportation outside of major cities, used by farmers and families that need multiple vehicles to get around. Cheap to buy and own, keis are mainly manufactured for the home market, with engines limited by law to 660 cubic centimeters.
Prime Minister Yoshihide Suga pledged last year to decarbonize Japan by 2050, with plans to ban the sale of new gasoline-only vehicles by the mid-2030s. That’s created a dilemma for Honda Motor Co., Nissan Motor Co. and other makers of compact cars, with the added cost of technology making them less affordable for buyers. Electrification can add ¥1 million to ¥2 million to the price tag of a kei, potentially doubling its price, according to Tokyo Tokai Research.
Decades of economic stagnation in Japan has spurred consumers to opt for kei cars. About 1.7 million units were sold last year in total, suppressed by the pandemic, while sales have been steady in the past years, according to the Japan Mini Vehicles Association.
With the pandemic weighing on the economy, and Japan’s unemployment rate ticking back up to almost 3%, consumer sentiment is falling. A price hike on kei cars would likely put the heaviest burden on people with lower incomes, especially older people and women, many of whom work part time and earn less than men on average. Some 40% of kei drivers are 60 or older, and the employment rate of women in the same age group who own keis is double compared with those who don’t, according to the association.
