Trump Wants U.S. Kei Car Production - 3 Ways That Could Happen

Trump drops auto industry bombshell in Oval Office

Following his recent trip to Japan, President Trump has declared that he’s making a major push to popularize U.S. kei vehicle production. Cars older than 25 years can be imported into the U.S., even if they don’t meet certain Department of Transportation (DOT) and Environmental Protection Agency (EPA) standards, and while this has increased the importation of used kei vehicles, current regulations — primarily Federal Motor Vehicle Safety Standards (FMVSS) — make U.S. kei production costly and impractical.

On Wednesday, President Trump told Oval Office White House reporters: “If you go to Japan, where I just left, and if you go to South Korea, Malaysia, and other countries, they have a very small car — sort of like the [Volkswagen] Beetle used to be — they’re very small, they’re really cute, and I said, ‘How would that do in this country?’ Everyone seems to think good, but you’re not allowed to build them. I’ve authorized the Secretary [of Transportation, Sean Duffy,] to immediately approve the production of those cars. Some of them are really beautiful,” Road & Track reports.

Transportation Secretary Duffy told CNBC: “He [the President] called me after the [Wednesday White House Oval Office] meeting, actually, and said, let’s change the rules. And so I worked with NHTSA. We’re in the process of clearing the deck. Listen, if there’s a market for those vehicles, I want to give our manufacturers the opportunity to build those cars. And so we are, and it’s going to clear the deck, clear the rules, and let them build those small cars.

“Are they going to work on the freeways? Probably not. But again, vehicles that work in cities, and if that’s where you drive, it could be a great solution for you. And by the way, much more affordable than other options that are on the market today.”

Duffy added: “If Toyota or any other company wants to make smaller, more affordable cars, fuel efficient, we have cleared the deck so they can make them in America and sell them in America.”

The roadmap to U.S. kei vehicle production 

For Trump’s vision to become reality, kei cars must meet U.S. FMVSS for crashworthiness and passenger protection. The three ways in which this could occur would be if Congress updated the National Traffic and Motor Vehicle Safety Act, NHTSA officials changed FMVSS, or auto manufacturers applied for a temporary exemption from federal standards, which is the least likely option, given that this exemption caps a company’s annual production at 2,500 units.

The most probable scenario is the NHTSA changing FMVSS, as Duffy confirmed to CNBC he’s actively working with the agency. However, DOT officials would need to post a Notice of Proposed Rulemaking for these changes, resulting in a mandatory comment period from various public, industry, and expert stakeholders, which could take months to years, according to the University of Michigan’s Law and Mobility Program, Tifani Sadek, who spoke to Road & Track.

If this federal government hurdle is cleared and kei vehicles are approved for U.S. production, automakers interested in manufacturing them would still need to push state compliance, as states retain authority over registration. Kei cars represent about one-third of Japan’s new vehicle sales, so the prospect of profit expansion could motivate manufacturers to lobby states. Additionally, the DOT could incentivize state uniformity via incentives like grants.

In Japan, new kei cars typically cost between $9,000 and $13,000 and get 40 to 50 mpg. Comparatively, new vehicles in the U.S. sold for $49,766 on average in October after reaching an all-time high of $50,080 the previous month.