Something for nothing: the case for hybrids

By Din Duggan

Granny told me that nothing in life is free - except TVJ and CVM. She also told me that you get what you pay for (see TVJ and CVM). But I've found a loophole in these once immutable laws of consumer economics. And, for a change, this loophole benefits ordinary Jamaicans.

For most of us who aren't drug traffickers or corrupt politicians, a car is the most expensive purchase we'll ever make - with the exception of a home. This is even more accurate in Jamaica, with our high motor vehicle import duties.

Vehicle purchases have broad implications for Jamaica - nearly 400,000 motor vehicles now traverse our roads. If you've purchased a motor vehicle - as opposed to a handcart - it would have surely been imported. These imported vehicles contribute significantly to Jamaica's US$5-billion trade deficit.

Our insatiable appetite for oil further perpetuates this outsize trade imbalance. An outrageous US$2.4-billion oil-import bill is exacerbated by our penchant for gas-guzzling cars and SUVs.

Government, through its import-duty regime, maintains a significant public-policy role in reducing the trade deficit, discouraging fuel-inefficient vehicle purchases, and, of course, protecting the local handcart industry.

In 2011, then Commerce Minister Dr Christopher Tufton announced substantially reduced duties on motor vehicles (the top rate was reduced from 180% to 97%). More significant, though, was the 41% duty on hybrid vehicles. This special hybrid duty was a hidden boon for Jamaican motorists and all Jamaicans who care about staggering fuel prices and environmental degradation (hybrids are more fuel efficient and significantly less detrimental to our environment than gas-only vehicles).

In April, I purchased and imported a hybrid. My motive wasn't altruistic. I simply did the math and discovered that good, old Granny was wrong. I was, in fact, getting something - a whole heap - for nothing.

More for less

The primary knock on hybrid vehicles is that they don't 'pencil' well. Most hybrids are priced at a sizeable premium over their non-hybrid counterparts. The 2013 BMW 535i, for example, carries a manufacturer's price tag of US$53,800. BMW's all-new 2013 5-series hybrid - virtually identical to the 535i in all other aspects - costs US$61,800 - an $8,000 premium. Even though it gets 15% better gas mileage, fuel savings wouldn't immediately compensate for the hybrid's higher purchase price.

The economics, though, are completely different in Jamaica.Under the new duty regime, the non-hybrid BMW attracts an aggregate duty of 115% - for a total cost of $115,670. The hybrid BMW attracts a much lower duty of 54% (both rates were recently increased) - for a total cost of $95,172.

My Toyota Camry Hybrid was priced (not including duty) about 10% higher than the regular Camry. The duty on a normal Camry at that time was 83%. I paid the 41% hybrid duty - saving thousands of dollars. For substantially less than the comparable non-hybrid model, I got a more technologically advanced car that benefits our country (50% less fuel consumption and reduced environmental impact), and benefits my wallet (I drive regularly but only fill up about once every three weeks and now own a car valued at 50% more than I paid).

There's little reason why more Jamaicans shouldn't be buying hybrids. There's a wide, and ever-growing, list of options - from Honda Civics to BMW X6s (and everything in-between).

Owning and operating a hybrid is similar to a traditional car. Like any other gas-powered vehicle, hybrid owners fill up at regular gas stations (the gas engine powers an electric battery which then powers an electric motor), purchase regular parts and service their vehicles for the same price, at the same facilities, as other cars.

START WITH CIVIL SERVANTS

The Government should be eagerly promoting hybrids. But, despite all the talk of Jamaica 'going green', it's doing the exact opposite. Under the new tax package, duties on hybrids increased by a third - from 41% to 54%.

If PM Portia Simpson Miller and Energy Minister Phillip Paulwell are serious about a less oil-dependent future, they should immediately halt the disproportionate increase of hybrid duties and instead act to incentivise the purchase of these vehicles. They can start with their own government vehicles.

Currently, a great number of civil servants enjoy a reduced import duty - paying 20% for eligible vehicles. This concessionary rate should immediately be raised to 54%, matching the duty ordinary citizens pay on hybrid purchases. The 20% rate should be maintained only for civil servants who purchase hybrids. Such a move would immediately trigger a government-led hybrid revolution, benefiting all Jamaicans.

I'm off to the gas station now - my final fill-up before Jamaica's 50th.

Din Duggan is an attorney working as a consultant with a global legal search firm. Email him at columns@gleanerjm.com or dinduggan@gmail.com, or view his past columns at facebook.com/dinduggan and twitter.com/YoungDuggan.