America builds trucks

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When President Donald Trump mused about bringing Japan's diminutive kei cars to America (he called them “really cute”) during a press conference last month, he seemed to be channeling a genuine consumer frustration. In Japan, a basic new kei car costs about $10,000. In America, average new car prices have hit $50,000, and buyers are increasingly balking, buying used, or simply holding onto aging vehicles longer than ever. And when they are buying, it’s smaller. Compact SUVs have overtaken their larger siblings in sales. Midsized trucks are gaining ground on full-sized models. 

Too bad Detroit stopped building small cars years ago. Ford $F sells exactly one car in the United States today, the Mustang. Chevrolet has retreated to the Corvette. The affordable small vehicles that once filled American driveways have been replaced by a parade of increasingly enormous trucks and compact SUVs. The disconnect between what consumers want and what Detroit builds has never been starker. 

Regulations that reward bigger vehicles

The American truck monoculture didn't emerge from consumer demand alone. It was engineered, in part, by a loophole in fuel economy regulations that has been hiding in plain sight for nearly two decades.

When Congress overhauled Corporate Average Fuel Economy standards in 2007, lawmakers tied fuel economy targets to vehicle size. Larger vehicles face less ambitious efficiency requirements than smaller ones.

The unintended consequence was predictable in retrospect. Automakers discovered they could sidestep painful efficiency investments by simply making their vehicles bigger. Combined with fatter profit margins on trucks and SUVs, the incentive structure pushed the entire industry toward supersizing. Researchers estimated the entire U.S. fleet could get between two and 32% bigger as a result, with emissions equivalent to running several additional coal-fired power plants.

Now Trump has moved to weaken those already-permissive standards further. His administration proposed cutting the 2031 fuel economy target from roughly 50 miles per gallon to about 34.5, and eliminated fines for automakers who fail to meet even that reduced bar. GM and Stellantis $STLA executives stood beside him in the Oval Office as he announced the changes. 

The Biden administration had estimated the higher standards would save Americans $23 billion in fuel costs collectively. Trump claimed, without evidence, that his rollback would cut $1,000 off the price of a car.

An affordability gap no one is filling

The irony of Trump's kei car comments is that bringing genuinely affordable small vehicles to America would require exactly the kind of regulatory intervention his administration seems allergic to providing.

Japanese kei cars stay cheap partly because they're built to different safety standards than American vehicles. A Honda $HMC N-Box, one of Japan's bestselling models, costs between $12,000 and $15,000 and achieves roughly 50 miles per gallon. But it lacks airbags, anti-lock brakes, and other features mandated in the U.S. Adding those requirements would push the price to around $22,000, comparable to a Toyota $TM Corolla and eliminating the value proposition entirely.

Despite these barriers, Americans are already demonstrating an appetite for small vehicles. Kei trucks are the largest class of vehicles being individually imported to the U.S., with around 7,500 arriving last year under a 25-year-old classic car exemption. These are decades-old vehicles with six-figure mileage that can't reach highway speeds. Drivers want them anyway.

Some startups are trying to thread this needle. Slate Auto, backed by Jeff Bezos, plans to build a stripped-down $20,000 electric truck in Indiana starting next year, eliminating paint, touchscreens, and power windows to hit its price point. San Francisco-based Telo is developing a compact electric pickup roughly the size of a Mini Cooper. At $41,000, it's pricier than Slate's barebones offering but still nearly a third cheaper than a conventional truck.

But these remain niche efforts. The major automakers have shown little appetite for the low-margin small vehicle market, especially now that regulatory pressure has evaporated. Ford's attempt at an electric truck was the Lightning, a full-size F-150 that promised a $40,000 price tag and delivered a $55,000 one. The company killed it last month after losing money on every sale. Its new strategy explicitly prioritizes “higher-returning areas” over affordable EVs.

For American consumers priced out of the new car market, the message from Detroit remains unchanged. You can have any vehicle you want, as long as it's a truck.