Increase In Demand For Hybrid Cars

Market is any arrangement that enables buyers and sellers to get information and to do business with each other. Meanwhile competitive market is a market that has many buyers and many sellers, so no single buyer or seller can influence the price.

Definition of demand is the ability and desire to purchase goods and services. When you demand something, then you want it? Can afford it, and plan to buy it. Wants are the unlimited desires or wishes that peoples have for goods and services. Did you ever thought yourself “ if you only you could afford it “ or “ why this stuff some expensive “. The quantity demanded of a good or services is the amount that consumer plan to buy during particular time and price. Neither the quantity demanded nor necessarily the same amount we bought. Normally quantity demanded exceeds the amount of goods available in the market. So the quantity demanded bought is less than the quantity demanded. We look the relationship between the price of goods and quantity demanded. Does other things remain the same?  Does the quantity demanded of a goods change as its price changes? The law of demand can provide you with the answer. The law of demand states “ other things remaining the same, the higher the price of the goods, the smaller the quantity demanded, and the lower the price of the goods, the higher the quantity demanded “ We must be wondering why the higher the price? The lower quantity demanded? There are two main reasons: Substitution effect and income effect. To see the substitution effect and the income effect at work, think about the effects of a change in the price..  I have been assign to do an individual assignment. The reason writing the weblog entries is to reflect and apply economic concept to a real world situation. I came across this article from the star online, http://biz.thestar.com.my/news/story.asp?file=/2010/12/30/business/7702950

The article is regarding “ Increase in demand for hybrid car “.

Honda Malaysia Sdn Bhd and UMW Motor Sdn Bhd have already recorded combined bookings of nearly 1500 units for Honda Insight and Toyota Prius hybrid models. These numbers of bookings come in less than three months.

Number of demand of hybrid car is increasing drastically. Demand of hybrid car is increasing because the government decision under budget 2011 to grant full excise duty exemptions on hybrid below 2000cc until Dec 31, 2011. If the consumers buy hybrid after Dec 31, 2011 they have to pay the car price plus with the excise duty. Basically they have to pay more. Since the government decision under budget 2011 to grant excise duty exemptions on hybrid car below 2000cc this is the time to buy car cheaper. Honda Malaysia Sdn Bhd is expecting bookings to hit 1000 units by the end of the month.  As we all know, Car price in Malaysia are really high compared to our neighbor Thailand and Indonesia. Our government imposed high excise tax on car. Since government already imposed tax on petrol car, now they want to impose tax on hybrid car above 2000cc after Dec 31, 2011. Basically people buy hybrid car because is cheaper and saves fuel consumptions compared to petrol car. Hybrid is substitute of petrol because is easy to maintain and fuel-efficient compared to petrol car as I mentioned so many time. Since nowadays petrol is becoming more expensive and government imposed high excise tax on car. Consumer tends to switch to hybrid car now.

According to spokesman, Honda Malaysia will continue to service and provide spare parts to their previous Civic hybrid. Honda Malaysia already discontinued importing Civic hybrid because Honda Malaysia introduce new hybrid model called Insight, which is way cheaper, compared to Civic hybrid.

Honda Insight is the cheapest hybrid car in the Malaysia market. Honda Malaysia targeting 4000 bookings units by the end of 2011.

Based on the article about increased demand for hybrid car. OSK Research auto analyst said rise-demand of hybrid car could have an impact on sales of petrol-based vehicles that were same price as hybrid car.

Consumer demand more Honda Insight hybrid and Toyota Prius hybrid and this will affect the sales and demand of Honda and Toyota petrol car that price range same as Honda Insight and Toyota Prius. Nevertheless, consumers still will to forking out a bit of money to buy hybrid car. Likewise I mention before people demand more hybrid car because it the substitute for petrol base car. Petrol base car need to pump petrol. If you car above 2000cc. you need to pump petrol more often. Hybrid car is good for a long term and save fuel consumption. Besides that, we hardly need to pump petrol because the car uses electricity power to move.

            The demand of price hybrid car increased does not mean everyone can afford it. The cheapest hybrid car in the market cost market around RM 100K- RM179K. The Government already grants excise duty exemptions on hybrid car 2000cc only till Dec 31, 2011. Do you think everyone can afford hybrid car? I personally think not everyone can afford it. The rich and middle class people could afford this hybrid car.

Moreover, the maintenance to maintain hybrid car is neither expensive nor cheap but nevertheless if the car break down. Normal, routine maintenance and minor repairs are not higher than petrol base car but if something goes wrong with the hybrid system? You are going spend a lot of money to replace hybrid system or to fix it. Most of lowest class people could not afford to maintain this type of car especially hybrid car. Malaysian National Car Company, Proton should come out their own hybrid car in order to provide for lowest class people. But likewise, I mentioned above the hybrid car system is the major problem here. It is not cheap replace brand new hybrid system; it cost a lot of money. The increase in demand for hybrid car only benefit does rich class people and middle class people who could afford and maintain it. Hybrid car for a short term does not beneficial but for longer term? Yes the possibility to maintain hybrid car for longer term is better than short term. The hybrid car is currently still new in Malaysia; it takes times for people to recognize it and to know how to maintain it. The substitution effect for petrol base car is hybrid car. Since not everyone can afford it, lowest class people have to take LRT. The substitution effect to replace hybrid car for normal petrol car is still not relevant.

In conclusion, based on this article Hybrid car is substitute for petrol base car. Although petrol car base still can be use.  Hybrid car are way cheaper than petrol base car. Consumer now faced with tighter budget, so they have to switch something is cheaper. This called income effect second law of demand. The quantity demanded for petrol base car will decrease since people now tend to buy hybrid car.

The graph above shows demand of supply of hybrid car below 2000cc. The demand of hybrid car is increasing drastically. Consumers tend to switch to hybrid car now. Petrol car base need to pump petrol. Since petrol price is getting expensive nowadays, hybrid car is the substitute to petrol car. Hybrid car is more convenient and user-friendly.