Hybrid Cars Need More Incentives to Attract Buyers

             Based on the news report by Jagdev Singh Sidhu, August 9 of 2012 on The Star, hybrid and electric cars demand in Malaysia are needed more incentives to increase the sales. In recent years, sales of hybrid and electric cars are increasing although the cost of the vehicle is higher than the consumer of United States pay when calculated in Malaysia currency. But have you ever thought what type of hybrid car users will benefit more to save their cost?
If you are using the hybrid car to travel from house to work place, hybrid car is not suitable for you to save your monthly cost instead you need to pay extra in your car loan because if you driving a Perodua Myvi 1.3cc the gasoline even cheaper than a hybrid car if you are traveling from house to work place. However, if you are a regular traveler to other states to meet your customers or company meeting hybrid car is suitable for you because the mileage is higher and need more fuel. Thus, it will very obvious hybrid car can save the cost of fuel if you are long distance traveler because short distance traveler does not need hybrid car but small cc vehicle will save their cost better than hybrid car.    

            When we analyze the different between Honda Civic and Civic Hybrid, the prices of the both vehicles are RM 115,980 and RM 119,980. Based on the price, Civic Hybrid cost RM 4000 more than Civic. Both of the vehicles have same fuel tank capacity which is 50 liters. The total cost of full tank Ron 95 is approximately RM 95.00. The only will affect the cost of using the vehicle every month is either the user is long or short distance traveler. Thus, Hybrid vehicle is affected the change of quantity demanded of common vehicle if most of the car users are long distance traveler due to substitution..

From the production possibility frontier curve, the curve of Civic is shift to the left. This is because the quantity demanded of civic is decrease due to substitute effect by Civic Hybrid. The government is extended the exemption import duty on hybrid cars below 2.2 liters. This will decrease the price of the hybrid car and the sales will increase because the consumers afford to buy the vehicle. 

            Proton is developing their own hybrid and electric vehicle in Malaysia. However, there is no local hybrid and electric vehicle sell in the market today. Most of the hybrid vehicles we saw in the market are from Japan car manufacturers for example Honda and Toyota. When the government is giving exemption import duty, the car dealers are willing to import more vehicles into Malaysia. This is because the exemption of import duty will cut their importing cost. Furthermore, they can sell in lower price to the customer and the customer will more satisfy to the vehicle price. From here, the car dealers can sell the vehicles in short time and reduce their storage cost because vehicle will depreciate every year.

            Although, the sale of hybrid vehicle is increasing in Malaysia, it affected the sales of other businesses for example petroleum and local car brands. Hybrid vehicle is fuel efficiency vehicle and use lesser gasoline than regular vehicle. This will decrease the usage of fuel and the petrol station will earn lesser profit. On the other hand, governments will pay lesser to subsidies on gasoline for example Ron 97 because the consumption of gasoline decreases due to increase of hybrid vehicles in Malaysia. Local car brands are also being affected when the imported hybrid vehicles have exemption of import duty for example Proton. This is because when the imported car price is decrease the sales will increase. However, the local car sales will decrease because the price of imported car is affordable by consumers.

            There are also some factors may affect the sales of hybrid cars for example subsidies of gasoline and public transport. Fuel and regular vehicle are complementary products. When the fuel price is decreases, the sales of regular vehicle will increases. Some consumers may choose to purchase regular vehicle when the fuel price is subsidies by government and it is not very costly for low cc vehicle for example Perodua Viva and Myvi. Moreover, there will be 12 new Light Real Transit (LRT) stations completed in 2014. This will encourage Malaysian to use public transport instead of driving and to prevent causes massive traffic jam in Kuala Lumpur and Selangor areas.  Thus, these would affect the sales of hybrid vehicles in Malaysia.

          Based on my opinion, I agree more incentives are provided in Malaysia to increase the sales of hybrid vehicles. There are several reasons that I agree more incentives should be provided to increase the demand of hybrid vehicles. The first reason is because when the demand of hybrid vehicles increases the usage of gasoline will decrease. This will save the expenditure of the hybrid vehicle users. Moreover, by using hybrid vehicles we are actually contributing to the environment friendly.

            The initial incentives should be provide in Malaysia to generate higher sales of hybrid vehicles is government should encourage the public cab organization to use hybrid vehicles. This will able to decrease the government spending to subsidies on gasoline. Moreover, government can offer hybrid vehicle buyers free road tax for few years so the buyers attracted with the advantage. In additional, electric vehicle (EV) station should build in Malaysia. This is because it will let the people to feel hybrid and electric vehicles are convenient and easily to find a station to charge the battery.

            In conclusion, when the sales of hybrid is increases, it will affected the regular car sales because of substitution from using a regular vehicle that performed lower fuel mileage compare to hybrid vehicles. However, the price of hybrid vehicle should adjust to achieve price equilibrium to prevent any surplus of hybrid vehicles. This is because the current price of the hybrid vehicles may not afford by the people in Malaysia since it cost around RM 100000. Therefore, I agree that more incentives to be given on hybrid vehicles because it will benefit to Malaysian and reduce their living cost.

-Sum Calvin