$5k rise in rebates on cleaner cars, surcharges for pollutive ones, to kick in next year

The move will help to steer Singapore towards its goal of phasing out internal combustion engine vehicles by 2040.
The move will help to steer Singapore towards its goal of phasing out internal combustion engine vehicles by 2040.ST PHOTO: ALPHONSUS CHERN

SINGAPORE - Rebates on the purchase of cleaner cars will be increased by $5,000 from Jan 1 next year to Dec 31, 2022 under the Vehicular Emissions Scheme (VES).

Cleaner taxis will have their rebates increased by $7,500 in the same time period, under the programme aimed at nudging motorists towards more environmentally friendly models of private transport.

In addition, surcharges for more pollutive cars will also be increased by $5,000 for cars, and $7,500 for taxis, in the carrot-and-stick model.

This will kick in on July 1, 2021, instead of the start of the year to allow time for the market to adjust, and will be in effect until Dec 31, 2022, the National Environment Agency (NEA) and the Land Transport Authority (LTA) said in a joint statement on Thursday (Nov 12).

The authorities say the move will help to steer Singapore towards its goal of phasing out internal combustion engine vehicles by 2040.

The increased rebates and surcharges mean buyers of cleaner cars will be awarded with rebates of up to $25,000, up from the previous $20,000, while buyers of the most pollutive cars will be penalised by $25,000, also up from $20,000.

The VES scheme was introduced in 2018 to reduce carbon emissions on Singapore's roads. It categorises vehicles based on emissions across five pollutants, with each category's rebate or surcharge calibrated accordingly.

The NEA and LTA said it has been effective in encouraging the purchase of cleaner car models, with the number of new cars that qualify for the cleanest two bands increasing by 60 per cent between the third quarter of 2018 and the first quarter of this year.

The number of those in the most pollutive two bands have fallen by around 20 per cent in the same time period.

Singapore University of Social Sciences associate professor of economics Walter Theseira said the VES rebates and surcharges could push motorists towards the adoption of cleaner cars in two ways. 

Because motor car dealers in Singapore usually quote a price inclusive of all taxes and certificate of entitlement (COE) bidding, a portion of the discounts usually goes to car buyers, while another could go to the dealers. 

This means that in addition to consumers getting a discount, the VES changes could also influence motor car dealers to import cleaner models. 

Cleaner cars include the Hyundai Kona Electric, the Renault Zoe and the Toyota Prius Plus, while more pollutive cars are those like the Mitsubishi Outlander 2.0 CVT, the Mazda CX-5 2.5 AT and the Porsche Cayenne E3. 

The enhanced VES is also a boon for aspiring electric car buyers, whose car models often fall under the cleanest bands.

Together with the early-adoption incentive scheme for electric vehicle buyers announced by the LTA in February - which offers rebates capped at $20,000 per vehicle - the increased rebates under the VES will allow for savings of up to $45,000 for each new fully electric car.

However, Prof Theseira noted that there are additional factors to consider with regard to electric vehicles. 

“The number of electric vehicle models is still very limited compared to that of internal combustion engines. Electric vehicles also require the owner to have available charging. I think until these two are solved the VES change will have minimal effect,” he said. 

Transport Minister Ong Ye Kung said on Thursday that industry watchers believe that costs for motorists choosing between electric vehicles and internal combustion engine vehicles will equalise by around 2025, or earlier.

Electric models are now still generally more expensive, and there were only 1,125 electric cars on the road as at January 2020.

Mr Ong also referred to Singapore's electric vehicle charging infrastructure, which has been cited as a potential bottleneck by industry watchers who believe the lack of chargers could stop Singapore's electric dreams in its tracks.

Singapore currently has 1,800 charging points and is planning to increase this to 28,000 by 2030.

Mr Ong repeated what he said in Parliament in October that the authorities are reviewing this plan to see if it could be made more ambitious by roping in commercial parties.

"What is clear is that EVs (electric vehicles) will become a reality, but we need to embrace and promote it," he said.

The LTA and NEA also added that it will be contacting industry stakeholders on possibly further tightening the vehicle categories under the VES in future.