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Tuesday, Aug. 7, 2001

Minicar presence gains on automaker innovation

Dragging economic conditions seen helping, hurting sales as tastes turn to smaller cars


Staff writer

Minicars were once regarded by Japanese consumers as second-class, cheap vehicles.

But thanks to their improved quality and unique designs, minicars are gradually gaining a foothold in the automobile market.

Workers assemble minicars at Daihatsu Motor Co.'s Ryuo plant in Shiga Prefecturre.

Buoyed by recent popularity, some automakers have started developing new products for this sector.

These even include foreign firms, which have hitherto avoided minicar production entirely.

"Since 1998, car users who switched to minicars from larger cars have increased, as they found minicar performance pretty satisfactory," said Osamu Ito, spokesman for the Japan Mini Vehicles Association.

"With the dragging recession, minicars' relatively low maintenance costs have attracted many car users."

In October 1998, the width of minicars -- vehicles with engine displacements of 660cc or less -- was increased by 8 cm to 1.48 meters, while the length was increased by 10 cm to 3.4 meters.

The measure was aimed at bolstering safety standards.

Some of the most popular minicars include Suzuki Motor Corp.'s Wagon R, Daihatsu Motor Co.'s Move and Honda Motor Co.'s Life, all of which sell for 900,000 yen to 1.3 million yen.

Official statistics suggest that Japan's economic woes have hit minivehicle demand, with sales in the first seven months of 2001 totaling 1.13 million units, down 2.3 percent from a year earlier.

The group says, however, that minicar sales for the entire year will probably exceed 1.8 million, which would mark the third- or fourth-largest total since the minicar association began compiling statistics in 1967.

Automakers explain that the underlying reason for their popularity derives from improved quality and safety, and their fuel efficiency.

Minivehicles also emit less carbon dioxide than normal cars and carry lower taxes.

Automakers say minicars have a wide appeal, particularly in rural areas where public transportation options are limited.

According to a March 2000 report by the Japan Automobile Manufacturers Association, nearly 80 percent of minicar owners use them as second vehicles.

Takaki Nakanishi, a senior analyst for Merrill Lynch Japan Securities Co., said that the unique ideas and concepts adopted by minicar manufacturers have contributed to their sales.

Several manufacturers have, for example, have created a wide variety of vehicles under the umbrella of one brand name. These might include a sporty model, a nostalgic style, a four-wheel-drive version and even models featuring popular characters such as Hello Kitty.

"Minicar makers are coming up with products with fun elements that attract customers who use the cars as if they are (their favorite) toy," Nakanishi said. "I think other automakers should learn from such efforts."

Minicars now account for 27.6 percent of cars owned by Japanese. This has prompted Nissan Motor Co. to enter the minicar market next year, via an agreement with Suzuki, the nation's top minicar maker, which will manufacture minicars to be sold under the Nissan label.

"With the entry of Nissan to the market, all Japanese car manufacturers will be participating in this category, which is great," Suzuki Motor Corp. Chairman Osamu Suzuki said at a recent news conference. "Minicars will finally be recognized as full-fledged cars."

In a rare foray for a foreign automaker, DaimlerChrysler AG is scheduled to introduce a minicar version of its Smart Coupe to the Japanese market later this year.

The original Smart Coupe, which has an engine capacity of 598cc, is being marketed under the normal car category because it's 3.5 cm too wide to be a mini.

The minicar version of the Smart Coupe, which will be produced exclusively for the Japanese market, will be the first imported mini to be distributed here.

Meanwhile, the rapidly growing market for small cars -- with engine displacements of around 1,000cc -- is expected to provide the minicar market with a fresh challenge.

In addition to popular small cars such as Toyota's 1-liter Vitz and Honda's 1.3-liter Fit, more new models are expected to join the small-car market in the near future.

While Nissan is scheduled to release its new March model in February, American giant General Motors plans to market the Chevrolet Cruze, developed on the platform of Suzuki's 1.3-liter Swift, later this year.

The Cruze will be the first GM car to be designed and manufactured in Asia for the Asia-Pacific market.

"Minicars have been granted full citizenship in the auto market," said Teruhiro Doi, Daihatsu's managing director in charge of product planning. "But as competition with small cars intensifies, we will have to expand our product lineup to meet the diverse tastes for customers."

Nakanishi of Merrill Lynch pointed out that one of the current advantages of owning a minicar -- lower taxes compared with that imposed on larger cars -- may dissolve in the near future. Nakanishi urged minicar makers to prepare for this development.

Although there is no specific proposal now to change the taxation system for cars, Nakanishi said he is anticipating that a proposed review of public funds currently set aside for road construction may affect the overall taxation system for automobiles.

"If the taxation system changes and minicar makers see no advantage in that respect, they don't have to stay minicar makers," he said. "Instead, they should move toward the 800cc to 1,000cc segments that are likely to expand globally."



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