Japanese automakers eye Minicar market in India and Indonesia
The kei cars or minicars make up almost half of the Japan’s domestic car sales, though in other parts of the world it is the big cars that generally people go for. After the world war II, minicars provided inexpensive transport facilities. The crowded and narrow roads in Japan are also responsible for rise in popularity of these kei cars in Japan’s domestic market. But the concept of these kei cars – meaning light cars in Japanese – is almost unknown outside Japan. The situation could change now; as Japan’s top automakers are now willing to export the kei car technology to growing markets like Indonesia and India.
As fuel prices soar, these Japanese minicars can be a boon to customers in India and Indonesia. Rising fuel costs in the world’s 2nd and 4th most populous countries and a rapidly growing middle class make these countries an ideal market for minicars.
Kei Cars for Overseas Markets
The competition in the minicar market is fierce. Japan’s third ranked auto maker, Honda, No.3 automaker from Japan, well known for its Accord and Civic cars, is planning to enter global minicar market to achieve its challenging target sales of six million cars worldwide by the first quarter of 2017, from current car sales of approx. 4 million. To do this, Honda is targeting to double the sales in emerging markets to account for 50% of the total car sales. Honda’s kei car technology could play key role in achieving its target.
The Japanese auto makers like Honda have designed the kei cars in such a way to make their production easier overseas. According to Honda, the kei cars can be useful in developed countries as well as in emerging countries. Honda is, therefore, targeting smaller and more affordable cars in markets like Indonesia and India, though it already has low-cost cars in these countries. The marketing conditions in Indonesia and India are favorable, so Honda thinks that it is the best time for exporting advanced technology of minicars to these countries.
Honda is not the only one. Toyota Motor Corp. also uses this technology from its partner – Daihatsu Motors – a specialist in kei cars, to develop such kei cars for Indonesia. Mitsubishi Motors Corporation is also eyeing to sell the kei car concept in Africa. Nissan executives also believe that kei cars have the potential to be a global success.
Few Japanese auto makers have already tried to make minicars popular in countries outside Japan, but there are exceptions. Daihatsu and Suzuki Motor Corporation are targeting South East Asia and India since 1980s and they have built a praiseworthy presence in the small car market even their technology is different from Honda’s kei cars. General Motors and its Chinese partner Wuling are boosting micro cars in China and aiming next at the Indian automobile market.
Kei Cars for Indonesia and India
Indonesia is such a big market where more than one million cars were sold in 2012. Recently, Jakarta took away its fuel subsidies resulting in increase in fuel prices almost by 33%. Around this time, Indonesia also signed in a Low Cost Green Car (LCGC) program for promoting these kei cars although they have their review pending.
Toyota, Suzuki, Honda and Daihatsu could make around 500,000 LCGCs together per year, once this new law is introduced, with each car valued under $10,000. It is anticipated that the Japanese companies will invest around U.S. $1.8 billion to manufacture kei cars in Indonesia.
Honda is willing to take the minicar technology to Indonesia and Malaysia. Honda has designed its minicar ‘N BOX’ that shares some structures with its popular model ‘Fit’ also known as Jazz globally. That means, N BOX and Fit can be manufactured on the same line. Honda is currently building the Jazz or Fit at its 10 different plants throughtout the world, including Thailand and Indonesia.
Pricing of cars is the main challenge for Honda as well as all other Japanese car makers. N BOX from Honda starts from $12,500, which is a little expensive than the Fit starting at $12,200. To reduce the prices, Honda plans to produce no-frill minicars staring at $10,000 in Indonesia. In this no-frill cars, features like airbags, vehicle assist systems, and turbocharger may have to be removed and also the old-fashioned keys may have to be used instead of electronic smart keys.