BYD’s tiny "kei" cars could be big in Japan

SUZUKI MOTOR

25/11/2025 12:00

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Refiles to fix spacing in third paragraph.

By Katrina Hamlin

HONG KONG, Nov 25 (Reuters Breakingviews) - It's an audacious move. Chinese electric vehicle maker BYD  002594.SZ, 1211.HK is launching its first model designed specifically for the Japanese market. In targeting the country's unique low-cost “kei jidosha” segment, where light vehicles are restricted to 3.4 metres in length, Chair Wang Chuanfu is taking on key rivals in their cosy home market.

The $118 billion company unveiled the boxy battery-powered Racco model at the Japan Mobility Show, which concluded this month in Tokyo. Sales will start next year. The Racco stands out for several reasons.

    It is one of only two cars made by BYD that is not available in the People's Republic. The booth where it was displayed was the only one hosted by a Chinese automaker: Japanese marques, which make up more than 90% of deliveries in their home market, dominated the show. So far, BYD hasn’t given them much to worry about – it has sold only around 7,000 full-size cars there over the past three years, but it may have more success with kei cars
    .

These account for 40% of the country's total auto unit sales, per Bernstein, with Suzuki Motor 7269.T and Daihatsu selling more than half of those. Buyers are price sensitive, and electric kei cars, which usually cost more than 2 million yen, roughly $13,000, are more expensive than the average model, which costs about 1.8 million yen.

Wang can potentially use BYD's low-cost manufacturing in China to eliminate that gap when it sets prices. It could also opt to sacrifice margins for the sake of gaining a stronger foothold in Japan, some two decades after it first established a presence in the country.

The latest geopolitical tensions between Japan and China are unhelpful, of course. In similar past diplomatic spats, Chinese consumers have boycotted South Korean cars, so it's easy to imagine Japanese opting to stick with local brands. But any level of success by BYD in such a cosy market would make a strong statement.

It could even lay the groundwork to sell mini cars elsewhere: Europe is considering adjusting its regulations to support sales of smaller electric vehicles, inspired by Japan’s kei cars. BYD's Vice President Stella Li said last week she is watching with interest and would consider bringing the Racco to the region.

The bold bet on diminutive cars looks worthwhile.

Follow Katrina Hamlin on Bluesky and Linkedin.

CONTEXT NEWS

BYD unveiled the Racco, its first car designed specifically for the Japanese market, at the Japan Mobility Show, which ran from October 30 to November 9 in Tokyo. The company has yet to confirm pricing for the "kei" car, which will go on sale next year. BYD was the only Chinese carmaker with a booth at the show.

Kei cars, or “kei jidosha”, are a class of light vehicles unique to Japan, restricted to no more than 3.4 metres in length.

Japanese carmakers dominate sales in their home market https://www.reuters.com/graphics/BRV-BRV/mopablnrnva/chart.png

(Editing by Una Galani; Production by Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))