Previously, it was 100% import duty exemption and 50% excise duty exemption, Budget 2011 made it 100% exemption for BOTH import duty and excise duty. The deal, for hybrid cars with 2.0 litre engines and below, was supposed to expire on Dec 31, 2011.”
With
the rising cost of fuel and the high pricing of owning an automobile, won’t it
be nice to have a vehicle that consume less fuel and it’s cheaper? Well wait no
more as Hybrid cars are available in Malaysia. For those who don’t know what a
hybrid car is, allow me to briefly explain.
Automobile
vehicle being a compulsory thing by means of transportation has become a
necessity in most society. The energy use to run such vehicle is fuel; a scarce
resource that is not considered a sustainable energy and that could eventually
run out. In an attempt to find for an alternative energy source, a technology
have prevail out of the rest; hybrid cards.
Hybrid
cars are one of the newest automobile vehicles that combine a fuel engine and a
battery tank. The concept is quite simply to grasp. The car combines both
gasoline engine and electric motor engine that inter switch when possible to
efficiently save fuel. It is estimated
that with such technology is saves a person as much as 30 miles a gallon on
fuel. The technology enables it to shut off the gasoline engine and switch to
an electric motor when idle. This is great especially when you are in a long
queue, waiting for someone at their front door or stuck in a traffic jam. It doesn’t just saves you a lot of money but
it emits lesser carbon compared to other cars. Once you start moving the
electrical engine automatically switch back to the normal gasoline mode.
Environmentally
friendly cars have been popular in Malaysia since 2006 because it contributes to
efficient fuel saving and it greatly reduce the emission of toxic fumes in the
air. Because of that the government of Malaysia is taking a great deal of
interest on promoting this greener technology car in to our society. This
initiative can be seen by reducing taxes impose on such vehicles and to some
extent provide 100% exemption on tax as of 2011 to end of 2012, which means
total tax free. Due to such actions by the government, there is a huge price
slash in the production of hybrid cars. Let see for example that a Honda Civic
Hybrid that initially cost RM129000 and Toyota Prius that originally cost
RM175000, now cost RM100,980 and RM128,046 respectively.
Since
the initiation of price exemption happened, there has been an overwhelming
boost in demand for hybrid cars due to the huge benefits that includes the exemption
of tax by the government. The total hybrid vehicle sales have been recorded to
have a shocking 2000% increase in the year 2011. The number grew exponentially
from 328 units the previous year to 8334 units.
To
give you a detail understanding of how does government tax relief affect the
sudden growth in hybrid cars, I will use the above graph to assist and allow me
to thoroughly explain the law of economics behind this extreme phenomenon.
Let’s
assume that P1 represent the aggregate price of hybrid cars as of 2010 and Q1
being the quantity purchase as of 2010. D is being the demand curve that
represent the total demand for hybrid cars and S1 being the supply curve that
represent the total supply of hybrid cars both as of 2010. The interception
between those two curves is marked with a blue dot, known as the equilibrium.
At the equilibrium is whereby the total supply meets the total demand in such a
way that there will be no surplus or shortage. In there the supplier will set
the optimum price and quantity to produce.
When
a tax exemption in this case has been imposed, the price of a hybrid car will
drop or reduce. When this happen as you
can see the original price, P1 will fall to a new price, P2. Incidentally when
that happen the quantity demanded, Q1 will shift downright to, Q2. Thus
creating a new equilibrium exemplified by the orange dot.
It
is observable that when a new price is lower than the original price (in this case
due to the exemption of tax) the demand will increase. However this will result
in a temporary shortage that needed to be adjusted by supplying more hybrid
cars that could meet the quantity demanded by the consumer.
Beforehand,
the government policy include only 100% tax exemption and 50% excise duty
exemption during the 2011 budget to be in effect till 31 December 2012 and with
the addition to 100% excise duty exemption. Because of the overwhelming growth,
the government have decided to reaffirm their stand to promote the use of green
technology and extended the period to 31 December 2013.
As so the new graph shown above
will be forecast for 2013 Hybrid cars. The transitions from P2 to P3 represent
the 50% excise duty exemption to 100% and Q3 will be the predicted quantity
demanded. Also the supply will increase due to the help of tax reduction. Hence, creating the new projected equilibrium
signified by the red circle green dot intercepting Q3 and S3.
Malaysian
auto industry successfully struck a deal with the Japan auto industry to
collaborate and bring hybrid car to Malaysia to be produce locally. It said to be rolled out from a plant in
Melaka. Presently only two nation dominates and supply car for the hybrid
market. That is Japan and USA.
With
price cut by exempting tax consumer now
see enough incentive to purchase the new
eco-friendly hybrid car. With the government taking responsibility and leading
the nation over greener energy, we are one step closer to reducing our carbon
emission and provide a greener future for our generation to come.
The concept is quite simply to grasp. The car combines both gasoline engine and electric motor engine that inter switch when possible to efficiently save fuel. It is estimated that with such technology is saves a person as much as 30 miles a gallon on fuel. hybrid car
ReplyDeleteIf the retailer does not collect sales tax, the purchaser has the obligation to pay use tax directly to the state where the property is used as long as the item is taxable.
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