Supply and Demand of Hybrid Vehicles - Term Paper Example

Hybrid vehicles are expected to solve the environmental problems. Owing to the growing consciousness and effort of nations worldwide an increasing demand for these vehicles is imminent. Big firms like Toyota and Honda have gained enormous grounds in terms of selling hybrid cars in the market. The demand supply interaction helps in identifying the consumer trends in the behavioral pattern in terms of their preference towards hybrid cars. The paper discusses the demand supply interaction of hybrid cars in the market and the factors, which determine the demand, and supply of such vehicles.

This also brings out the level of environmental awareness achieved worldwide and also at the individual level. Hybrid Vehicles: Supply and Demand Introduction The growing need for a protective and safer natural environment triggered the demand for the development of Hybrid Vehicles. People around the world are becoming increasingly aware of environmental threats emanating from the depletion of natural resources like petrol. Moreover, the world is facing spontaneous environmental threat from depletion of Ozone layer and increased pollution emanating from petrol and diesel run vehicles.

To combat the rise of the above factors acting as a global threat that the Hybrid vehicles came into existence. The Hybrid vehicles are developed to run on gas electric technology. The innovation of gas electric technology enables the vehicles to combine gasoline and electric power motors for running. (“Hybrid Vehicles”) Demand for Hybrid Vehicles Consumer’s Viewpoint It is observed that there has been a rapid development in the production of Hybrid Vehicles around the world. The large automobile brands like Toyota and Honda are found to take active participation in the development of Hybrid Vehicles in the global sphere.

From the consumer’s point of view, the purchase of Hybrid Vehicles earns certain distinct advantages. Hybrid Vehicles being run on the combination of electric and gasoline power helps in the reduction of pollution in the environment. Moreover, the increased use of Hybrid Vehicles helps in saving petrol and money needed to purchase such from the petrol pumps. Consumers are found to demand more of Hybrid Vehicles to the traditional ones owing to its increased operating efficiency. It is found that the technological development of the Hybrid Vehicles helps to reduce the load on the automobile’s engine.

Further, the Hybrid Vehicle also helps in saving energy consumption. The engine of the Hybrid Vehicle ceases to run instantly on stooping the car. Moreover, the Hybrid Vehicles running on a gas engine serves the customers by providing efficient horsepower for better driving performance. Batteries of the gas engines get automatically charged from the generator associated to the gas engine. The Hybrid Vehicles earn huge demand for their aerodynamic designs. Hybrid Automobiles made of lightweight materials have attractive features and comfortable occupant arrangements, which help in getting increased customer attention.

(“Hybrid Vehicles”; Lovins, 9-10; Benjamin, 1135). Business Viewpoint From the business point of view, the carmakers like Toyota and Honda are getting an increased mileage on sales for selling of the Hybrid cars. It is found that the dealership of Toyota had incurred a huge pipeline of customers demanding for the Hybrid Cars. The customers had to wait for a period of about one year before getting an access to the technologically developed cars. Moreover, the car sellers are found to get more sales of Hybrid cars by selling those over the Internet.

One of the Hybrid models sold through eBay help fetch a Toyota dealer $27,900 where the marked price was $26,200. A survey shows that major automobile manufacturers around the world like Toyota, Honda, General Motors and Daimler Chrysler are switching over to Hybrid model automobiles owing to its increased fuel and operating efficiency. (Centrella) Further, Toyota with the help of newly innovated Lithium ion charged batteries is increasingly focusing to stay far ahead in the automobile industry.

The company targets selling 1 million units of Hybrid cars by the end of 2011. Again, Toyota’s deal with Australian based Orocobre Limited for the procurement of Lithium to charge the car batteries helped the Australian company to be listed highest in the stock market. (Amaha & Layne) Supply of Hybrid Vehicles Toyota, the Japanese automobile manufacturer along with Honda was the pioneer in selling of Hybrid Vehicles in the automobile market. Toyota is observed to have launched the Prius, a Hybrid Car model in the United States in the year 2000.

However, Honda had started selling Hybrid Car models prior to Toyota in America. An estimate reveals that from the period of January 2004 to December 2009 the number of Hybrid Cars made available to America crossed the 1.5 million mark. Further observations state that in the year 2008 the number of Hybrid Cars sold reached a figure of 45,000, which however dropped to 40,000 in 2009. In terms of brand offerings to the consumers it is found that Toyota other than offering Prius has also made hybrid models for Camry, Highlander, RX, GS and LS models.

Honda being the pioneer in the Hybrid car market had long offered the car market with Hybrid models of Civic and Accord. Another, big automobile manufacturer Nissan came with Altima hybrid in the automobile market. General Motors is found to concentrate more on Hybrid trucks while only designing the car model, Malibu. (“Economic downturn spells hard times for hybrids”). Demand and Supply Analysis of Hybrid Cars The Demand and Supply analysis of Hybrid Vehicles conducted would help gain a better insight into the behavioral patterns of consumers and producers in the automobile market.

It is because the demand analysis would focus more on consumer spending patterns while supply analysis on the producer’s or manufactures strategy in gaining a higher market share. Further, it must be noted that the equilibrium price for any product or service is obtained by the mechanism of the supply and demand forces. (Jain & Ohri) The graphs given below show the Price points for the Hybrid Vehicles on the Y-Axis and are given as P. Similarly, the quantity sold or demanded for the Hybrid Vehicles is given as Q and shown on the X-Axis.

It is found that the Demand Curve D and Supply Curve S intersect at a certain point. The point extended on the Y-Axis renders the equilibrium price for the Hybrid Vehicles. Similarly, the point extended on the X Axis gives the equilibrium quantity sold for the Hybrid Vehicles. However, with the rise in demand for Hybrid Vehicles the Demand Curve D shifts to Demand Curve D1. Correspondingly, the quantity sold and price of the Hybrid Vehicles shifts from Q to Q1 and P to P1 respectively. Increasing the supply from S to S1 can lower the price of the Hybrid Cars.

With the rise in supply the quantity of Hybrid Vehicles in the market would also rise from Q to Q1. The price of the Hybrid Vehicles would focus a reduction from P to P1. On the contrary, supply of the Hybrid Vehicles reduced would amount to the Supply Curve to shift from S to S2. Correspondingly, the quantity of Hybrid Vehicles in the market would also fall from Q to Q2. Price of the Hybrid Vehicles on the contrary would increase from P to P2. D S D D1 Y Y P P1 D2 P P2 Q X Q2 Q1 Q X Y D S2 S S1 P2 P P1 Q2 Q Q1 X Conclusion The Hybrid Vehicles mainly produced by the automobile giants Toyota and Honda reflect a huge demand in the automobile market.

It is because the Hybrid Vehicles offer a sea change from petrol or diesel driven vehicles to power driven vehicles. Moreover, it helps not only in conservation of natural resources but also helps in reducing pollution. Hence, Hybrid Vehicles can be rightly called as the vehicles of the new millennium. Works Cited 1. “Hybrid Vehicles”, eco INDIA. 2008. 19 November 2010 2. Benjamin, William A. Directory of industry data sources: the United States of America and Canada, New York: Harfax, 1982 3.

Lovins, B. Amory. Reinventing The Wheels: The Automotive Efficiency Revolution. eJournal USA: Economic Perspectives. 11.2. 19 November 2010 4. Centrella, R. Heidi. “Hybrid Cars in high demand”, Journal Record, The (Oklahoma City). 2004. 19 November 2010 5. Amaha, Eriko & Nathan Layne. “Toyota in Argentine lithium deal for hybrid car push”, Reuters. 2010. 19 November 2010: 6. “Economic downturn spells hard times for hybrids”, green-energy-efficient-homes.com. 2010. 19 November 2010< http://www.

green-energy-efficient-homes.com/hybrid-car-sales-statistics.html> 7. Jain, TR & VK. Ohri. Principal of Microeconomics. FK Publications, n.d.