Some budget cars could be classified as premium models when a new rule is introduced that requires cars to be tested for engine power before they can be sold.
The new rule, to be implemented by October, could result in some budget cars costing more.
This is because their engine power output is close to the 97kW cap for cars under Category A of the certificate of entitlement (COE) system, and a test - now mandatory for cars producing between 81kW and 97kW - could show a higher number.
If so, they will be placed in Category B, where they will jostle with bigger and costlier models for COEs. Usually, COEs for Category B cost more than those for Category A.
Category A cars whose engine power is close to 97kW include the Kia Forte K3, Hyundai Elantra, Hyundai i30, Toyota Corolla Altis, Honda Civic, Honda Jazz, Ford Focus and Volkswagen Jetta.
Motor industry sources said car manufacturers are usually conservative in their power output declaration to avoid consumer complaints.
Since February, Category A cars have been required to meet two criteria: an engine size of not more than 1,600cc, and a power output of not more than 97kW or 130bhp.
The second criterion was implemented to level the playing field for sellers of mass-market cars, who in recent years have been edged out of Category A by 1.6-litre models from luxury brands such as Mercedes and BMW.
But as soon as the new criterion was introduced, a number of European makes - including Mercedes - brought in models that produced slightly less than 97kW.
So, the Land Transport Authority (LTA) declared last month that Category A cars must undergo tests on a chassis dynamometer - a "treadmill" for cars - to verify power figures declared by their makers.
It said it would also review data supplied by importers and dealers through "independent checks with overseas counterparts" and other resources.
This is the first time that vehicle data has been challenged this way. As a result, it will take up to four months before a new model can be approved for sale - against one to four weeks previously.
Car dealers described the move as "disruptive", "arbitrary" and "unilateral".
They also warned that some budget cars might fail to meet the power cap, and would thus be placed in Category B. This would nullify efforts to separate mass-market cars from premium and luxury cars, which are intended to give each category a more equal footing in competing for COEs.
Mr Say Kwee Neng, managing director for Singapore, Indochina and Indonesia at Sime Darby Motors, said: "How did we end up in this blind alley? We all gave feedback that engine power was not a suitable criterion, and now, we're trying to find fixes."
Jardine Cycle & Carriage's managing director of motor operations, Mr Eric Chan, said: "We respect (the LTA's) right to do this, but certainly, four months is too long for an approval process."
Dealers said the process would also raise operating costs, as cars would spend more time in storage before they could be sold.
Moreover, the cost of the dynamometer test - to be borne by motor companies - has yet to be determined.
Other industry players warned that dynamometer test results could vary depending on the type of fuel, tyres, wheels and gearbox - and even the air temperature and how warmed up the engine is.
Results also depend on how the dynamometer reading is interpreted.
A chassis dynamometer measures power delivered by the wheels, while manufacturers declare the output delivered by the engine. There will be some loss when power is transmitted to the wheels.
The LTA said "a correction factor will be applied" to the power figure measured at the wheels to determine what the engine actually produces. It refused to elaborate.
Manufacturers said there could be too many variables for a "correction factor" to be useful.
Volkswagen Singapore spokesman Colin Yong said: "For example, our seven-speed, dual-clutch gearbox has a 91 per cent efficiency level, while our six-speed model comes in at 87 per cent."
He added that traditional automatic transmission would have even lower efficiency when transmitting power to the wheels.