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Small is big for Japanese automakers eyeing Indonesia and India markets


TOKYO--Japanese automakers like Honda Motor Co and the Toyota-Daihatsu group have a problem: the smallest cars they make are very big in Japan - and only Japan.

Consider Honda's hi-tech N BOX, a four-passenger microcar that combines some of the utility features of a much larger SUV - the seats roll down to load a bicycle or two - and the fuel-sipping economy of a tiny, 660-cc engine. For the first half of 2013, the zippy N BOX was the best-selling car in Japan's popular vehicle category that now represents almost 40 percent of vehicles on the road.

But outside Japan, the concept of the so-called kei car, a term derived from the Japanese word light, is mostly unknown. Now that could change. The Japanese auto giants are considering exporting the technology to emerging market countries.

"We have fairly low-priced cars in those markets already, but in India and markets like Indonesia, we need even smaller, even more affordable cars," Honda's chief spokesman Masaya Nagai said.

Rising fuel costs and a fast growing middle class in the world's second and fourth most populous states make them likely to be the first microcar customers. As a first step, companies such as Honda have designed their kei cars - the kei is pronounced like the letter "k" - in a way that makes its easier to produce them overseas.

"We spent a long time nurturing the kei car technology in Japan, and we think it has the potential to be useful not only in developed markets but also in emerging markets," Honda's Chief Executive Officer Takanobu Ito told reporters in June.

Honda is not alone. Toyota Motor Corp is using technology from its affiliate Daihatsu Motor Co, a kei-car specialist, to develop minicars for Indonesia.

Mitsbubishi Motors Corp is looking at selling kei-concept cars in Africa, where President Osamu Masuko plans to attend a distributors' conference this month. Nissan's Chief Operating Officer Toshiyuki Shiga also said last month that kei cars have a potential of going global.

While few Japanese carmakers have tried to popularize microcars outside of Japan, there are exceptions. Suzuki Motor Corp and Daihatsu have targeted India and Southeast Asia since the early 1980s, building a credible presence although their technology differs from that used to build Honda's kei.

More recently, General Motors Co and its Chinese affiliate Wuling have been making an aggressive push for micro minivans in China. Their next bet is India.

Honda believes its advanced microcar technology and the favourable marketing conditions in India and Indonesia mean that the time is right to export the kei concept. Joost Geginat, an autos market expert with Roland Berger consultancy in Singapore, predicts Japanese companies will invest a total $1.8 billion to produce kei-concept cars in Indonesia.