Increase in demand for hybrid cars. Really?

An excerpt from The Star's Business section "Increase in demand for hybrid cars",

An analyst from a local research house said the spike in demand for hybrid cars like the Insight reflected the public's need for fuel efficient cars at affordable prices.

“The car is not only cheaper but provides good fuel economy as well,” he said.
...
OSK Research auto analyst Ahmad Maghfur Usman said the rise in demand for the Insight could have an impact on sales of other petrol-based vehicles that were within the same price range.

“I think it would affect sales of vehicles like the Toyota Vios and Honda City. People would not mind forking out a bit more money to buy a hybrid.”

TheAutoIndustrieBlog however has a different opinion. We think it is far too early to draw any conclusion regarding the demand of hybrid vehicles in Malaysia. Any new product, especially one from an established brand like Honda or Toyota will of course be in high demand for the first few months. It will usually take about about 3 months or more before the demand trend normalizes. Only then should one start to make any conclusion(s). We will hesitate to call this a "spike." Until the government makes a clear announcement on the hybrid incentive validity period for the years after 2011, this will be nothing more than a temporary thing. Plus, the numbers that we are looking here are from a very low base. Any statistical studies on the growth rates will suffer from low base effect that it is pointless to say how many hundreds were sold versus last year.

From our experience, the people who bought a Civic Hybrid, by far the most popular hybrid in Malaysia (before it was discontinued as HMC's Suzuka plant retools to build the next generation Civic) bought the car because it was sold to them by the sales person. Surprisingly, neither environmental concerns nor fuel economy was the main reason of purchase. Honda sales persons had strong incentives to sell the Civic Hybrid while consumers see it as a higher specs car (4 airbags versus 2 in the Civic 1.8 plus leather seats) plus the assurance of a "made in Japan" quality image.

An average of 20,000 units of Honda City are sold each year, while the Toyota Vios, with a wider variant range sees around 32,000 units sold each year. The 4,000 units sales target for the Insight is miniscule in comparison to the sales volume of City and Vios. While the Prius, with its much higher price, is even less significant. We don't think sales of the City and Vios will be affected in the long term, maybe in the initial months, but not for the rest of the year.

Local buyers are a conservative lot when it comes to vehicle purchase. The tried and tested with strong resale value will continue to reign. Many pretenders to the crown have declared their intentions to take a slice of their market - Kia Forte, Ford Fiesta, Mazda2. Participants in Internet forums and blogs make all sort of claims, saying nobody would want the Vios and City anymore. Yet, many months down, none of these new models have left any impact to the sales of these two B-segment kings, if they even felt any impact at all. These traditional strong sellers won't just see their sales drop overnight because of some new comer. Like we said, it is too early to draw any conclusions.

In a market where fuel prices are controlled, hybrids don't make much financial sense. If you want to save fuel, the regular B-segment sedans are already very good at it. The price premium of a hybrid can buy you a lot a of litres of fuel. In the case of an Insight, the price premium over a similar size City 1.5E buys you 4,379 litres of fuel. Don't bother calculating for the RM139,900 Prius. We also know of people who want to get a hybrid now simply because these people don't want to contribute to the government's tax coffers. Plus, there aren't many made in Japan cars that come with reasonably high specs at this price range. Like we mentioned in our earlier hybrid buyer's guide, buy it because it is unique, because it is quiet and easy to drive, then you won't be disappointed.

Related links:
Honda Insight buyer's guide
Malaysian buyer's guide : Honda Civic Hybrid and Toyota Prius review
The great powertrain debate - diesel vs hybrid