Vehicles: With all eyes and heads on the electric cars, hybrid cars, which the economic development policy, 2010, accorded equal fiscal incentives like the e-cars enjoy today, have been forgotten.

According to the economic development policy, 2010 which is valid until December 31, 2015, both electric and hybrid cars were supposed to be exempted from sales and customs duty, including their spare parts.

However, when the revised tax came into effect since July last year, Hybrid vehicles were slapped a tax of 45 percent – customs duty and sales tax of 20 percent each and five percent green tax.   Earlier, the policy exempted hybrid cars  from customs duty and sales tax, except for the five percent green tax.  So, tax on hybrid cars was revised by 40 percent.  But electric cars enjoyed zero tax.

The economic affairs minister, Norbu Wangchuk, said the government respected the earlier policy and this was why hybrid vehicles enjoyed only 45 percent, when other vehicles were levied 150 percent tax. “There are still some incentives for the hybrid cars,” he said.

But the fact that hybrid cars still burn fossil fuels, in spite of consuming very less fuel compared to other fuel vehicles, he said, it did not enjoy the incentives similar to electric cars. “But the whole economic development policy is being revised and will come into force from July this year,” he said.

A Honda Insight, a hybrid car, today comes at a price of Nu 2M (million) in the country, including the 45 percent tax, and a Toyota Prius C costs Nu 1.8M.

Should these cars enjoy equal incentives like electric cars, it would cost around Nu 1.2M to Nu 1.4M, as compared to Nu 1.4M for a brand new Nissan Leaf.

Hybrid cars are much more convenient than electric cars, because the owners will not have the battery anxiety which is very prominent with electric cars.  Both cars have the same amount of luxury and comfort, in this case.

A closer analysis showed that a Toyota Prius C, for instance, would yield a mileage of about 29 kilometres a litre of petrol resulting in a fuel bill of about Nu 24,286 a year and Nu 242,860 over 10 years.  The capital cost is around Nu 1.2M, excluding all taxes.

Over a 10-year time, at the current price of petrol, assuming both the cars runs about 30 km a day, a Prius C would consume Nu 66.5 worth of fuel resulting in annual fuel bill of around Nu 20,000 a year.  Total cost in 10 years for such a car would be around Nu 1.39M.

On the other hand, cost of charging a Nissan Leaf would amount to about Nu 26,000 in 10 years.  Taking into account the current power tariff for three blocks and the capital cost, in 10 years, it would cost Nu 1.426M, without considering the battery replacement cost.

Officials from the car dealers said that because of the tax, hybrid cars did not flourish in the market. Should the taxes be incentivised as the electric cars, many customers would opt for hybrid cars because of the battery anxiety in case of electric cars and its replacement cost.

By Tshering Dorji