The Electric Vehicle Early Adoption Initiative (EVEAI) and increased Vehicular Emissions Scheme (VES) spell for cheaper electric vehicles when they kick off in Singapore in 2021
On November 12, 2020, the Land Transport Authority (LTA) announced increased VES rebates/penalties for all cars. As summarised in our report, like any good pollution tax it means cars that pollute more become more expensive, and vice versa.
But another piece of interesting news from that announcement is that the VES will combine with the Electric Vehicle Early Adoption Initiative (EVEAI) rebate, announced earlier in February.
Our analysis from February, which incorrectly assumed VES would not be combined with EVEAI, showed that EVs of a certain price level would be the ones who benefit most from EVEAI, up to a maximum of S$20,000 cheaper.
With VES rebates increasing by S$5,000 more, the very simplified point to take away is that certain battery electric vehicles (BEVs) will become up to S$25,000 cheaper when the updated VES, and EVEAI, kick in on January 1, 2021.
How does this work, and how much less expensive will they become? Read on for The Simple Explanation, or scroll to the bottom of this story for the The Math Heavy In-Depth Explanation.
VES adds a maximum rebate of S$25,000, the A1 band, for cars which pollute the least.
Vehicles in the A1 band must emit zero particulate matter – or soot and smog – and thus only BEVs are capable of achieving A1 banding, examples including the MG ZS EV and Nissan Leaf.
EVEAI adds another rebate of 45 percent of ARF (for an explanation of ARF read our report), up to a maximum of S$20,000.
So VES S$25k + EVEAI S$20k = S$45,000 rebate = BEVs become S$45k cheaper in 2021?
Not quite, sorry. There is an ARF ‘price floor’ of S$5,000, since a car can’t have an ARF of zero or else you’d get nothing back for early de-registration.
But you can see from the chart that less expensive EVs benefit less and vice versa, which sounds strange on paper – why aren’t cheaper EVs even more discounted? Why is a Jaguar I-Pace, a luxury BEV with 400hp, S$25k less expensive? The LTA points out that it’s the proportion of price that counts.
Because of the tiered nature of ARF, a car needs to have an OMV of at least S$35k to benefit more from VES+EVEAI. Take the Hyundai Kona for example: It’s not a cheap car at S$139,999 with COE, but with a S$22k rebate it becomes S$117k with COE, which is far more appealing.
Contrast that to the Jaguar I-Pace, which even at S$25k off is still S$323,999 with COE. The VES+EVEAI rebate hits where it is most effective, bringing cars from the mid- or high-S$100k price range closer to S$100k. In other words, EVEAI + VES makes mid-range BEVs go from expensive to possibly quite affordable for many more people.
You can also see, comparing the MG ZS EV and Hyundai Kona EV, that in certain cases it actually is more ‘worth it’ to have a car with a higher spec/OMV, and that could lead to some EVs becoming better equipped but remaining at the same final retail price.
Secondly, Road Tax for some EVs will fall because of a revision in the formula used to calculate EV Road Tax, which currently is very high, especially for more powerful EVs.
The catch is BEV owners still have to pay an extra flat Road Tax component (again, detailed in our report) on top of regular Road Tax, and that’ll be S$700 every six months by 2023. And the EVEAI only lasts three years, so we’ll have to see what the prices of BEVs are like in 2023 to see if they really have dropped into the sub-S$150k ‘affordable’ range.
The second catch is, the price drops only if all other things remain equal, which they won’t. The biggest factor here is the COE, which we fully expect to go up in 2021 and beyond. A S$5k price increase in COE could easily negate the additional VES rebate, for one thing.
But even if BEVs become cheaper, but it’s not like everyone has a place to charge them, what gives?
From an industry point of view, nobody seriously expects Singapore to switch to electric cars on a large scale until 1. Charging infrastructure is available for every car owner, not just landed properties and 2. We find a clean, renewable way to power these cars. It’s still early days for electrification and Singapore is far from the leading edge in this. But any steps towards encouraging buyers to buy greener cars with the most important nudge – the wallet – is welcome at this point, because of air pollution and climate change.
The real winners, without any buts, we think are petrol-electric hybrids – like the humble Toyota Prius, or Kia Niro Hybrid. They don’t have BEV-style road tax or additional Flat components, a lot of them are VES A2 band cars (S$15,000 rebate) so will become S$5k cheaper next year.
Quite a few hybrids, such as the Hyundai Ioniq, Kia Niro and Toyota Prius+ are already in the mainstream price bracket, and will be even more attractive for car buyers in 2021.
PHEVs (plug-in hybrids) will also benefit from the VES boost, but they do not receive the EVEAI, and most PHEVs are luxury cars, so the price difference isn’t as big as it is for mainstream hybrids or BEVs.
Disclaimer: These calculations are done to the maximum of our understanding, so we apologise in advance for any mistakes. The last time we did this much math it was 1998.
– Car price = OMV + ARF + COE + Registration Fees and other small fees.
– ARF is where the EVEAI and VES rebates are computed, and is a tiered tax. The higher your OMV, especially above S$20,000, the higher your ARF, disproportionately. More expensive car = more ARF tax.
– The EVEAI maximum rebate is S$20k.
– The ARF minimum level is S$5k.
Price 2020: S$128,000 with COE
OMV = S$31,160
ARF, based on OMV = S$35,624
EVEAI 45 percent of ARF = S$16,030
Computed ARF 2020 after rebate = S$35,624 – S$20,000 = S$15,624
Computed ARF 2021 after rebates = S$35,624 – S$25,000 (VES) – S$16,030 (EVEAI) = -S$5,406.
Effective ARF after rebates = S$5,000.
Effective price difference of ARF 2021 vs 2020 = S$10,624.
Effective total price in 2020 = S$128,000 – S$10,624 = S$117,376 with COE