BYD takes aim at Japan’s beloved ‘kei’ car market

TOKYO: China’s biggest automaker, BYD, is about to shake up one of Japan’s most sacred automotive traditions — the kei car. The company is set to unveil its first-ever all-electric kei vehicle at the Japan Mobility Show this Friday, marking its boldest move yet into Japan’s tightly protected market. The tiny EV — smaller than a two-door Mini Cooper — won’t hit showrooms until late next year, but it’s already making waves across Tokyo.

A bold entry into Japan’s most guarded segment

Kei cars — short for kei jidosha or “light vehicles” — are the heart and soul of Japan’s auto culture. Beloved for their compact size, affordability, and generous tax breaks, these pint-sized cars make up nearly a third of all vehicles sold in the country. The market has long been ruled by domestic brands like Honda, Suzuki, and Daihatsu — and few outsiders have ever dared to compete.

That’s what makes BYD’s arrival such a jolt. “When it comes to EVs, Chinese automakers have been on the rise globally, and we have a strong sense of crisis about that,” said Eisuke Mori, a ruling party lawmaker who heads Japan’s parliamentary automobile caucus.

A wake-up call for Japan’s auto industry

Since entering Japan three years ago, BYD’s performance has been modest — only 6,600 EVs sold so far, far below expectations. “In terms of our initial expectations, our sales in Japan are missing a zero,” admitted Atsuki Tofukuji, head of BYD’s passenger car sales business in Japan.

But this new kei EV could be the company’s breakthrough. Analysts and government officials told Reuters the car’s affordability and compact size could appeal to Japan’s budget-conscious buyers, especially with ongoing EV subsidies and tax incentives.

Industry watchers say the move should serve as a wake-up call for Japanese automakers, who have doubled down on hybrids while falling behind in pure electric vehicles. For them, BYD represents both a challenge and a reminder, and that Japan’s dominance in small cars isn’t guaranteed anymore.

Strategic pricing and a long-term bet

BYD’s kei project reportedly began after executives who visited Tokyo in 2023 noticed just how many kei cars filled the streets. They saw how many kei cars were on the roads and were struck by the sheer variety, according to Tofukuji.

Now, BYD plans to expand to all 47 Japanese prefectures by the end of next year — a clear sign it’s in this for the long haul. Analysts expect the company to lean on aggressive pricing, the same playbook that helped it win over consumers in Southeast Asia and eat into Japan’s market share there.

Still, the road won’t be easy. Japan’s EV subsidy policies are shifting under new Prime Minister Sanae Takaichi, who has criticised programmes that she says favour foreign automakers like BYD and Tesla. Recent policy changes have already cut BYD’s subsidies from ¥850,000 to ¥350,000 (about $5,500 to $2,300).

Even so, experts believe this move is about more than money. “For Chinese automakers, selling in Japan is a kind of status — proof they’ve become world-class,” said Koji Endo, chief analyst at SBI Securities.

The road ahead

As BYD prepares to roll out its first kei EV, Japan’s carmakers — and its policymakers — are watching closely. The launch could prove to be more than just another new model reveal; it may be the biggest test yet of Japan’s century-long hold on its own auto market.