Demand And Supply Of Hybrid Car

I found some a few really interesting article online regarding demand and supply of hybrid cars. Article based on: http://biz.thestar.com.my/news/story.asp?file=/2013/2/22/business/12743848&sec=business

http://paultan.org/2012/09/25/maas-wish-list-for-budget-2013-extend-hybrid-incentives-introduce-vehicle-scrapping/

http://auto.family.my/hybrid-models-in-huge-demand-in-malaysia-after-govt-incentives/

http://paultan.org/2011/10/07/budget-2012-hybrid-car-incentives-extended-till-2013/

http://savemoney.my/malaysia-hybrid-car-buying-guide-do-hybrid-cars-save-you-money/

 In reality, demand and supply and the relationship between them lie at the very centre of economics. But what is demand and supply of hybrid car in Malaysia market? The demand and supply of hybrid cars in Malaysia is getting bigger. Many consumers prefer to buy hybrid car compared to petrol car, which is environmental friendly then petrol cars. Let me give you short definition of hybrid car. Hybrid defines as fuel car with two different motors. The first motors known as petrol-powered and the second one is electric motor plus with using rechargeable battery.  In today world, environmentally friendly car known as hybrid car have been popular worldwide because it contributes to savings fuel consumption and reduce the emission of carbon dioxide. The other main reason why consumers buy hybrid cars is because Malaysian government introduced full import duty and excise duty exemption for both hybrid cars and electric thus demand of hybrid cars in Malaysia is increasing. Nevertheless, the full import duty and excise duty was meant for car below 2.0 litre engines and below.

Cars are one of the most important transportation to citizen in Malaysia especially to those who live in big city. Most of the family nowadays at least own more than 2 car. In matter of fact, for the rich family maybe they own more than 5 cars inside their garage. Cars are very vital transportation in Malaysia beside the public bus. We cannot travel from A to B by riding bicycle unlike Japan because of their climate. Recently, Malaysian government is trying to encourage consumers to purchase more hybrid cars, which will help to reduce carbon footprint from fuel bill reduction and lower CO2. Hybrid cars are known as electric cars run using electric power to replace petrol. Besides that, that the causes the demand of hybrid car has increased because of government incentive. Demand is related to consumers wants and to consumers who can afford to buy it. Basically, any car firm need to consider type of hybrid car should they bring in to Malaysia and whether consumers can afford to buy the hybrid car. After that, only demand of hybrid car can be increase. Nowadays, car are considered number one necessity in transportation system.  Consumers need to know more about hybrid car before they made their decision. Another important factor is petrol. Petrol is the main sources for cars to move. In general, petrol is complementary goods of cars. Complementary goods define as goods consumed together. As the price  of one goes up, the demand for both goods will fall. Another simple example is, coffee and sugar. Price of petrol nowadays are really expensive, consumers have to find other alternatives such as buying hybrid car that does not consumed petrol. If this scenario happen demand for petrol fuel car will drops and made the demand curve shift to the left.  

Graph 1.1 above. Black line shows the supply curve for of the petrol car and red and green line indicates the demand curve of the petrol car. As you can see from the graph 1.1, there is equilibrium in the Malaysia car market at the quantity of Q1 and P1. When the price of petrol increase, it will affect the Malaysian car market. Petrol is complement goods for the car similar like coffee and sugar. If we buy coffee at coffee shop without put sugar, it will taste bitter. As the price of one complementary goods goes up, the demand of another goods will fall. Basically complementary goods needs one another. Moreover, as the price of petrol increases, the consumers will find another alternatives way to replace petrol car.  Nevertheless, the increased price of petrol will affect the consumers income  as they need to spend more money on petrol. Consumers realizes the different types of car can affect the car markets thus consumers begin to buy hybrid car as an alternatives to petrol car. Government decions to grant full excise duty exemptions on hybrid car below  2000c until the end of 2013 has attracted a lot of consumers to buy hybrid car. Hybrid car price not only much cheaper compared to petrol car because of full excise duty exemption and consume less petrol compared to petrol consumption car.  Demand and supply curve below wil show how the price of petrol effect the change of hybrid car. Consumers prefer to buy hybrid car nowadays compared to petrol car.

Graph 1.2 above show demand and supply of hybrid car. The red line indicates the supply curve of hybrid car and green and red line show the demand of hybrid car in market. As you can see from the beginning, when there is no change in price  petrol, the equilibrium  point of quantity is at Q1 and the price is P1. Nevertheless, if the price of petrol is increases, this will attract more consumers to buy more hybrid car compared to petrol consumption car. As a result of increasing petrol price, consumers tend to buy hybrid car thus causes the demand curve shift to the right. This result has causes a new equilibrium form at the quantity increases from Q1 to Q2 and the increase price from P1 to P2. The selling of hybrid car in Malaysia market in this few years has attracted many consumers. Honda Malaysia Sdn Bhd and UMW Toyota Sdn Bhd are among two most famous car company that selling quite a lot hybrid car in Malaysia. Since government introduced tax redemptions on hybrid car below 2000c, they should extend the incentives to more than 5 years so the demand for hybrid car can be increase for the long term. The Malaysian governments currently provides incentives to consumers to buy any hybrid car below 2000c to increases the demand of hybrid car. Nevertheless, the selling price of hybrid car is still expensive for luxury car brand like Audi A6 hybrid but most importantly consume less petrol than standard petrol consumption car. Nevertheless, hybrid car price still more competitive than petrol car because of governments incentives. Governments subsidy has made the price of hybrid car becoming more affordable price for consumers to buy because no import duty and excise duty on hybrid car and another main factors of increasing in demand of hybrid car in Malaysia. The main attraction of hybrid car is because of smaller engine capacities but still have a lot main power and consume less petrol consumption. Hybrid car has been proven an alternative to lowering fuel consumption and environment friendly. Besides that, hybrid car can switch between electric or petrol power thus it has more benefits compared to petrol car. In Malaysia market, UMW Toyota and Honda Malaysia dominating the market structure and in other word it is called monopoly in the short run term. This two-car company set the pricing of car price at very high and sell to the consumer since its monopoly in the short run. In the long run, there will be more car company established new hybrid technology for example, Audi, Volkswagen, and more. So basically when more car companies like Audi and Volkswagen come out with new hybrid technology it will cause fierce competition among car firms in the market. So in general, when there is fierce competition among firms they will reduce the car price in order to attract more consumers to buy their car brand. The cheapest hybrid car in the market will dominate the car market. In contrast, car firm should set hybrid car price at lowest as possible in order to survive in market to attract more consumers, and hybrid car pricing should not be cheaper compared to petrol consumption car. If this ever happen in future, hybrid car will control car market because hybrid car is a perfect substitute to fuel base car and hybrid car are has more benefits such its environmental friendly. 

In my opinion, hybrid car will bring revolution in car industry in future but also saving fuel consumption and eco friendly car to environment. Consumers will tend to buy hybrid car if petrol price becoming more expensive near future. Hybrid car has a lot more attraction and offers way better than petrol consumption car.

Moreover, the price of hybrid car in Malaysia car market are quite competitive right now because of exemption on duty and import tax. The governments are the main reason why increases demand and supply of hybrid car because of hybrid car incentives. Nevertheless, the hybrid car incentives only last till 31 December 2013. In my opinion, they should extend it to another 3-5 more years to increase the demand of hybrid car and to attract more consumers about the benefits of buying hybrid car.   The governments may change its policy near future so there are no guaranteed the price of hybrid car will remain affordable for all consumers. Nevertheless, I hope more car company will established more hybrid car technology in near future because everyone around the world can enjoy its benefits.

Reference/ Bibliography

·      Paultan.org, Malaysian source for automotive news, 2012. Budget 2012: Hybrid car incentives extended till 2013! (Hitting the headlines article) [online] (Updated 7 October 2011) Availabe at:< http://paultan.org/2011/10/07/budget-2012-hybrid-car-incentives-extended-till-2013/>  (Accessed 20 May 2013)

·      Helpin Malaysian save money.my, Malaysia car hybrid car buying guide – Do hybrid car save your money, 2012 (Hitting the headlines article) [online] (Updated 17 July 2012) Availabe at:< http://savemoney.my/malaysia-hybrid-car-buying-guide-do-hybrid-cars-save-you-money/> (Accessed 20 May 2013)

·      The Star Online, Honda upbeat on hybrid car sales, targets 12000 vehicles this year, 2013 (Hitting the headlines article) [online] (Updated 22 February 2013) Available at:< http://biz.thestar.com.my/news/story.asp?file=/2013/2/22/business/12743848&sec=business> (Accessed 20 May 2013)

·      Paultan.org, Malaysian source for automotive news, 2012. MAA’s wish list for budget 2013: Extend hybrid incentives. Introduce vehicle scrapping. (Hitting the headlines article) [online] (Updated 25 September 2012) Available at:< http://paultan.org/2012/09/25/maas-wish-list-for-budget-2013-extend-hybrid-incentives-introduce-vehicle-scrapping/> (Accessed 20 May 2013)