The Electric Vehicle Early Adoption Initiative (EEAI) and increased Vehicular Emissions Scheme (VES) spell for cheaper electric vehicles when they kick off in Singapore in 2021
UPDATE: February 2020 – NEA math shows EEAI and VES stack for up to S$45k off
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 (EEAI) 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$45,000 cheaper when the updated VES, and EEAI, kick in on January 1, 2021.
How does this work, and how much less expensive will they become?
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 $20k + $25k = S$45k cheaper, as the NEA examples show. However the catch is your car needs to be ‘expensive enough’ to have a max rebate – i.e. if the OMV/ARF isn’t far above S$20k, you won’t get the max rebate. But overall, the thing to understand is that BEVs will certainly become more affordable.
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.