Business

Monday September 8, 2008

Slow start seen for hybrid cars

By EUGENE MAHALINGAM


Analysts say the prices are still expensive

WHILE environment consciousness has been on the rise in Malaysia, fuelled by the surge in oil price, sales of hybrid cars powered by fuel and electricity are expected to have a slow start despite the recent tax exemptions.

Honda Malaysia Sdn Bhd is currently the only company importing hybrid cars into the country – its Civic Hybrid. To date, the company has sold 16 units since its launch in August last year.

Its managing director and chief executive officer Atsushi Fujimoto believes tax incentives announced during Budget 2009 will make hybrid cars more affordable to Malaysians.

“We expect more demand for the Civic Hybrid and we are well prepared to meet the sales as well as after-sales service,” he said in an e-mail reply to StarBiz.

The Budget has proposed the removal of import duty on hybrid cars and a reduction in excise duty to 50% on new completely-built-up (CBU) hybrid cars with engine capacity below 2,000cc for franchise importers.

The exemption is for two years to prepare for the local assembly of hybrid cars.

Malaysian Automotive Association president Datuk Aishah Ahmad said the tax incentive was a welcome move but added that the two-year exemption should be extended.

“The exemption period should be extended as most auto players would only be ready to manufacture CBU vehicles in 2010,” she said.

She added that as hybrid cars were about 30% more expensive than non-hybrid versions, the tax incentive would make hybrid cars more affordable.

OSK Investment Research, in a recent report, said while the tax exemption was a welcome move, the high price of fuel would still deter people from purchasing hybrid vehicles.

“The much anticipated tax break on hybrids finally came. However, we feel that the current petrol price levels (which is capped at not more than RM2.70 by year-end) may not stimulate demand for hybrid cars.”

“Studies on mileage efficiency indicate that it would take at least five years for urban city drivers to cover the premium gap on hybrids, while long distance highway drivers could take up to 36 years to realise the potential savings based on current petrol prices,” OSK said.

The research house said it did not foresee any increase in total industry volume (TIV), given the long payback period on the higher price of hybrids and the lack of local spare part suppliers and manufacturers.

It added that the two-year exemption (to prepare for the local assembly of hybrid cars) by the Government could be more of a test run on the potential demand for hybrids.

“At the current price of petrol, hybrids are still expensive as they are considered more of an environment-friendly car rather than being fuel-efficient,” OSK said.

The research unit said it did not see any impact on TIV until the mass production of completely-knocked-down hybrids or until Proton starts offering hybrid vehicles.

“For Proton, the two-year period may prove to be beneficial in assessing the viability of the mass production of hybrids,” OSK said. A hybrid Gen2 was showcased last year at the Geneva Auto Show in 2007.

OSK admits that Honda has much to gain from the Budget 2009 incentive for hybrid vehicles.

“Currently, the only beneficiary of the new tax structure for hybrids is Honda, as the exemptions only applies to franchise holders who are genuine importers and not importers with approved permits.”

The price tag for the Civic Hybrid is RM162,800 (on-the-road with insurance) while the non-hybrid 1.8 litre and 2.0 litre models cost RM113,800 and RM128,800 respectively.

OSK estimates that with the new tax incentives, the Civic Hybrid would be priced at around RM120,000.

“Such a price tag is still considered expensive as hybrid cars sold in developed markets such as the US are relatively cheaper from a fuel-efficient standpoint, as petrol in that country is being sold at a 30% premium compared to ours,” said OSK.

The research unit, however, said that with prices down to the RM120,000 mark, there would be a surge in demand for Honda hybrids as buyers of the conventional Honda Civic or Nissan Cefiro cars may consider switching to hybrids.

The research house also said that UMW Toyota could benefit from the tax exemptions should it decide to bring in its hybrid CBUs such as the Toyota Prius, adding that Hyundai and Chery Alado could also be introducing hybrid models in 2009.


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