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The EU is killing small hatchbacks – but can Japan's tiny kei cars save the day?

Kei car
Space-efficient, affordable and fun, the kei car is one of Japan's greatest mobility assets. 

Comparisons are odious, said the Bard, but it was hard not to see the irony of the situation at this year’s Tokyo motor show. As we’ve reported, in Europe small cars are an endangered species, victim of forthcoming exhaust emissions legislation, yet the Japanese capital’s narrow roads are thronged with tiny Kei cars whizzing about, bringing democratic and economic individual mobility that compact designs such as the BMC Mini and Fiat 500 brought to Europeans.

These tiddlers grew a little and gained the designation of A-segment – but could the Japanese Kei class save the day for small cars and their buyers drivers in Europe, we wondered?

In the background is a growing concern in the automotive industry that almost an entire generation of A-segment or sub-B cars (the EU erroneously calls them "city cars") will disappear when new EU carbon dioxide (CO2) emission requirements are introduced next year. This is controversial because these diminutive cars sell mostly to young and old people, few of them wealthy. At about 3.5 metres in length, an A-segment car brings modern safety and environmental standards to buyers who might not otherwise consider a new car.

Some see A-cars as a democratising force, extending individual mobility to all parts of society, ages and geographical areas, allowing people to travel to work, visit family and friends and live their lives in a way wealthier folk take for granted. They’re also popular, representing about eight per cent of Europe’s new car market and up to 15 per cent in Italy.

In the UK the main A-segment contenders are the Fiat Panda and 500, Ford’s Ka+, Renault's Twingo, Toyota's Aygo and its spin-offs, the Peugeot 108 and Citroën C1, Vauxhall’s Adam, and the Volkswagen Up, Skoda Citigo and Seat Mii trifecta.

There are plenty of situations in which high speed crash safety, and indeed high speeds, are unnecessary 

They’re all miracles of mass production, and to make profits every part of the process needs to be in alignment and pulling together: in purchasing, engineering, planning, marketing and manufacturing. It’s the type of thing that Japanese firms are good at and it’s interesting that only Toyota has expressed any enthusiasm for continuing to make this size of car.

“We see a very bright future for the Aygo,” said Matthew Harrison, vice-president of Toyota Motor Europe, recently. “We might be on our own, but Aygo volume and segment share continues to grow. It’s a profitable business equation for us – they’re the youngest customers we have; [Aygo] is often their first car.”

While he’s right about the audience, Harrison is a lone voice of optimism. As Jürgen Stackmann, VW’s sales and marketing head told Autocar magazine in March: “If Europe is pursuing this legal target, there is no single business case for cars the size of the Up. They are too small for the new technology, and the engine can’t meet the CO2 targets. You’d need to sell an EV [electric vehicle] just to be able to sell a city car. 

“So the life of small cars with conventional engines is very hard. It’s a problem. I don’t think the politicians have picked up this problem yet. What do you buy in the future when you cannot afford a new car?”

At the same Geneva motor show, PSA boss Carlos Tavares agreed: “The economics of small cars [is] simple. You need to look at the way the CO2 legislation structure is written; the lighter the car, the more demanding the CO2 regulation, so small cars are very demanding on CO2 and the only way is to get rid of the ICE [Internal Combustion Engine] in them. You are going to see a segment of cars [A segment] that are going to disappear because if you put a price on them to make them sustainable, that’s a price that young people can’t afford.”

Tiny cars have always been tough to make money on (in the Seventies, Henry Ford II dismissed plans for the all-new, 3.55 metre-long Ford Fiesta saying: “Small car, small profits”), but EU requirements mean an A-car has relatively high CO2 emissions compared with plug-in hybrids or battery-electric cars, so they suffer. VW’s Up, for example, produces 101g/km of CO2 in its cheapest £9,225 form, against 48g/km for the £67,550 Audi Q7 3.0 TDI e-tron quattro.

The new EU emissions requirements come in two parts. The first is next year’s corporate average CO2 emissions requirement of 95g/km. Fines for non-compliance are crippling - €95 for each gram per kilometre over the limit for each car produced - and European research specialist Jato Dynamics estimates that, based on 2018 CO2 emissions, the industry might have to pay as much as €34 billion in 2021, with VW, PSA, Renault, Fiat and Daimler slated as the worst affected.

Tavares says PSA will not be paying fines, “but there will be consequences,” he warns, “and the EU might not like them”.

He is referring to is what is being termed the “hollowing out” of Europe’s car industry, with a loss of jobs, research and development work, university grants and the export of manufacturing to outside of Europe. But it doesn’t end there...

The EU’s second requirement follows soon after, mandating a 37.5 per cent cut in average CO2 emissions by 2030 from 2021’s 95g/km limit, which effectively means an average CO2 figure of about 60g/km. This was voted in by the European Parliament last year and ratified this April. Its severity surprised a lot of observers, and was much larger than those called for by the European Automobile Manufacturers’ Association (ACEA) and even the recommendations of the EU Commission.

Andrew English drives a kei car in Japan 

Not that the rest of the world is rushing to adopt these standards and phase out the smallest passenger vehicles. “An A-car is often the first car young people buy,” says Olivier Murguet, Renault’s sales and marketing head, “and they are still profitable from a global perspective. We sell 200,000 in Latin America and India, but we have to be very careful where we launch.”

Not in Europe, then. And while battery-electric power is in theory a solution, it’s not so simple, or cheap. Tavares points out that a battery pack can represent 70 per cent of the cost of an A-segment vehicle, which means it has to sell for a high price. Even though it was heavily discounted before it was withdrawn from sale this year, Volkswagen’s battery-powered Up was £23,640 and its 83-mile range makes it only suitable as a second or third car.

So is this bye-bye to all small cars? It seems ironic that a few years ago manufacturers were moaning that young people weren’t buying cars any more and now the latest EU regulations are pricing those that still do off the road. 

It’s also hard to see any environmental benefits in effectively outlawing small cars. They have much lower annual mileages than larger models, which means they don’t produce as much CO2 or pollution in total. And while giant plug-in hybrids (PHEVs) and battery-electric vehicles have lower CO2 emissions on paper, the tests are artificial, take no account of whether owners plug in, or the greenhouse gas emissions of generating the electricity to charge them, which in the case of cars such as Porsche’s new Taycan can amount to 92g/km – comparable to a normal car, only far more expensive.

Nor does it seem fair that crash-impact safety, which has to be built into an A-car to enable its passengers to survive an impact with large and heavy PHEV and battery-electric cars, are carried by the smaller car’s buyer alone.

And what will the environmental (and safety) effects of Europe’s annual total of 1.2 million new A-car buyers choosing alternatives; be they bigger and more thirsty new cars, or used cars without the most modern safety and emissions equipment? 

Car makers whistle in the wind, pointing to new leasing and car-sharing arrangements to provide an answer, but these expensive options aren’t always open to the less well-off or rural dwellers, and can be financially risky for car makers effectively buying their own production. As Tavares says, there’s a “superficiality of thinking” about European governments and the EU.

So could Kei cars come to the rescue? These tiddlers are 70 years old this year, an enduring result of a set of rules created by the Japanese government after the Second World War to get the country motoring and build up the motor industry, in the same vein as VW’s Beetle or Fiat’s Nuova 500.

Current models are typified by Honda’s market-leading N-Box, Mitsubishi’s eK range and equally boxy numbers from Suzuki and Daihatsu. Various Kei models have been imported to the UK in the past, including the Suzuki Jimny, the Suzuki Wagon-R and also the Super Carry van, which was rebadged as the Bedford Rascal. Perhaps as telling is the slow emergence of battery-electric Kei cars, such as the Mitsubishi i-MiEV or Nissan’s IMk concept at this year’s Tokyo motor show.

Small vans are a compelling solution to transport needs; the vehicles in this photograph represent fantastic use of space

They’re small, their research and development costs are amortised in Japan so they could be marginally priced and they are already proving a big success in countries such as India, so why not Europe? The practice seems more difficult than the theory, however, as proved at the show.

“Kei cars would be ideal,” says Tsunehiro Hunimoto, design director of Mitsubishi, which shares design and production of Kei cars with its Alliance partner Nissan. “Suzuki runs a big Kei car business in India and it has achieved a big market share. But compared to Japan, Indian regulations are more relaxed. On the other hand, Europe is the toughest... To meet European standards on emissions and safety would be difficult.”

His colleague Guillaume Cartier, Mitsubishi’s sales and marketing director, agrees and points out that Kei cars aren’t very profitable even in Japan, and that they sell mostly outside Tokyo’s mega-sprawl, in rural towns and villages.

It was a similar tale at Suzuki and Nissan, where engineers said the market is very tight and only just profitable (hence the large number of co-operation deals) and giving a thumbs-down to getting Kei past Europe’s tough safety and emissions requirements – side-impact protection is the most insurmountable problem, apparently.

“It might take big and expensive modification,” mused Hiroshi Nagaoka, Mitsubishi’s engineering director. “There would be severe cost, price and packaging issues.”

Allowing a domestic Japanese solution to fill a gap created by its own rules would challenge EU legislators, and might rightly rouse domestic manufacturers, but it’s going to take innovative solutions to keep both young and old mobile in space-efficient and clean cars. 

Kei might not save the day, but neither will expensive battery-electric cars. (Nor will exorbitant motoring usage contracts similar to those used for mobile telephone companies, even though Silicon Valley moguls and entrepreneurs close to governments would love that to happen.)

Thinking on the issue of these tiny cars is going to have to get clearer in future, as Tavares says. “If you only look at tailpipe emissions and not the vehicle’s life cycle, then you are never going to see the true environmental cost to the environment. And there is no European agency at the moment which co-ordinates and counts these things.”

Miguel Arias Cañete, EU commissioner for climate action and energy, said in April: “The adoption of the legislation setting new CO2 emission standards for cars and vans is an important achievement.

“We are putting the transport sector on the right pathway towards clean mobility, helping EU industry to modernise and strengthen its competitive position in the global stage.”

Hmmm, some people think there might not be much European industry left after the EU has done its work. Given the EU’s stated aim of “working for social equality”, I wondered what the average Minister of the European Parliament might make of the effect of their voting on the individual mobility of their most vulnerable constituents in the most far-flung regions.

I also wondered what they thought of a potential Kei-class solution, or perhaps targeting EV grants more towards smaller cars.

So far, not one has responded to my email.

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