Honda Civic Hybrid

Now that most of the regional automotive manufacturing and assembly has gone to Thailand, the biggest buzzword that had been uttered repeatedly during the period where the NAP review was being formulated was hybrid cars and green technology.

So we had to shift focus. The government was quite bent on trying to get a piece of the green pie instead. Or so it seemed, there was plenty of talk in the papers. And you know what they say, supposedly in ASEAN you build your pick-ups in Thailand, your MPVs and vans in Indonesia and your passenger cars in Malaysia. That’s supposedly what kept Volkswagen interested despite flip-flop partnership decisions in the first place.

The new National Automotive Policy review offers a cocktail of R&D grants, duty exemptions, fiscal incentives to whoever invests in the assembly or manufacturing of hybrid and electric vehicles. For automakers, you’ll get 100% Pioneer Status/Investment Tax Allowance for 10 years, training and R&D grants in addition to existing grants, 50% exemption on excise duty on CKD/manufactured vehicles from the IAF.

For hybrid parts suppliers such as electric motors, batteries, Battery Management System, inverters, electric-powered air conditioning, and air compressors, you will get 100% Pioneer Status for 10 years and 100% Investment Tax Allowance for 5 years.

Toyota Prius

Even before the NAP review was announced, there was one measure that was announced leading up to these new hybrid/EV car incentives announced during the Budget 2009 last year. Imports of CBU hybrid vehicles were given an exemption on import duty and a 50% excise duty exemption. These exemptions will end on the 31st of December 2010 and the NAP review mentions no intention to extend this deadline. If you want to grab a Prius or a Civic Hybrid, you’d better do so before the end of next year, as prices on these cars are sure to go up.

The biggest blow to the government’s green dreams was the announcement that Toyota was going to setup a hybrid manufacturing facility in Thailand. One of the cars that were to be assembled is the Toyota Camry Hybrid. Toyota sells the most hybrid vehicles among all automakers and they are probably the first to setup a hybrid plant outside of their ‘home ground’. Because of their best-seller status, they are able to get the volumes to justify new investments not only in Thailand, but in Australia and soon the UK.

Even with the new lower price of RM129,980 (RM1,180 higher than the Civic 2.0S), Honda Malaysia Sdn Bhd only managed to register a total of 100 units of the new Honda Civic Hybrid in Malaysia as of July 2009, and this is the total amount registered since its introduction in our market. The numbers for the much more expensive Toyota Prius certainly will not do any better.

Honda Insight

It looks like hybrid cars remain a niche product here despite reduced pricing and there is simply no volume for any car manufacturer to even think of setting up Malaysian assembly facilities, let alone manufacturing facilities. Unless of course you are talking about the ‘SKD’ trickery that some car companies are successfully pulling off. All Honda hybrids are so far assembled at its Suzuka plant.

The government has failed to understand that the production of hybrid vehicles cannot be simply placed anywhere a car company likes – there has to be an ecosystem of hybrid component suppliers as well. It’s a completely different chicken and egg scenario than the one the government thought was most important – pricing and acceptance of hybrid cars which they attempted to solve with the CBU hybrid car incentives that managed to bring the prices of the Civic Hybrid and the Prius down in Malaysia.

And now that Toyota – the largest seller of hybrid vehicles in the world – has placed a hybrid production center in Thailand, guess where the hybrid supplier eco-system is going to be?

Toyota Camry Hybrid

The only thing we can do now is sit and wait for hybrid vehicles to take off in terms of acceptance and sales internationally. Then maybe some will come here. But that’s a big maybe. We can look at companies like Ford and GM. GM has a big base in Thailand but they’ve shown some interest in facilities here in the past. We’ve already covered how the Chevrolet Volt is simply too expensive a vehicle to make for what it is, but perhaps the next generation of GM hybrids.

Ford has also shown some improvement in its hybrid car sales – it’s hot on Honda’s heels to take the position of the #2 hybrid seller in the US from the Japanese company. But still, all of these hybrid cars from non-Japanese manufacturers are very US-centric – all medium to large SUVs pretending to be green by adding a motor-assist system in order to comply with weird CAFE systems. They won’t sell in any kind of decent numbers here, not in Malaysia, not in this region, so no reason to assemble them here. Ford Europe is relying more on diesel but the Ford Kuga will be the first European hybrid for the company.

But seriously, for any of that to happen, there will be a gap of years and years in between the end of the CBU import incentives and the introduction of the first locally assembled/produced hybrid car. Prices will shoot up skywards all over again. Hybrid cars will once again become unaffordable. When the cars are not on the road, people will be less exposed to them. Whatever low level of acceptance that hybrid cars currently have will once again go down the drain. And then the first CKD hybrid car will roll out with a decent price, with everyone being afraid to actually buy it.

Do you see what’s wrong with the picture?