Why the forthcoming electric vehicle (EV) rebate won’t change much at all for prospective EV owners in Singapore
– Less expensive EVs will increase in price, and vice versa
– Road tax for EVs will drop, but increase significantly after 2021
– More charge points, but probably not enough widespread EV ownership
UPDATE: March 2, 2020 – Included new calculations of the rebate effects, expanded explanations and more analysis
February 18, 2020 – Story first posted as breaking news, including LTA official press release and updates/figures.
Singapore’s deputy prime minister Heng Swee Keat, today announced measures to improve the adoption of battery electric vehicles (BEVs) in Singapore, with a three-pronged plan announced during the Budget 2020 speech.
This marks the most significant effort by the Government to promote the adoption of BEVs to date. We still don’t know if this will change much, honestly.
Mr Heng told Today news: “We are placing a significant bet on EVs, and leaning policy in that direction because it is the most promising technology. Our vision is to phase out ICE (internal combustion engine) vehicles and have all vehicles run on cleaner energy by 2040.”
The plan includes lower prices for BEVs, a revision to existing road tax formula, and an increase in the public charging network.
The first measure, dubbed the EV Early Adoption Initiative (EEAI, our acronym) is an additional registration fee (ARF) rebate for BEVs of up to 45 percent, capped at S$20,000.
It takes effect from January 2021 and will last for three years.
But what is ARF, besides the sound a dog makes?
ARF is a tiered tax based on the car’s open market value (OMV), so cars which are more expensive have a higher ARF. Below S$20k OMV, the ARF is 100 percent, from S$20,001 to S$50,000, it is 140 percent, and above S$50,0001, it is 180 percent.
To give examples: A Kia Cerato EX, the base model, has an OMV of S$14,498 and pays the same amount in ARF. A Toyota Corolla Altis 1.6 Elegance has an OMV of S$21,763, and pays S$22,469 in ARF, while a BMW 520i has an OMV of S$51,844, and pays $65,320 in ARF. A Lamborghini Urus has an OMV of S$177,788, and pays S$292,019 in ARF.
Thus a 45 percent ARF rebate, up to S$20k, simply means cheaper BEVs in 2021, right?
Not really. While the price of most EVs will remain the same, it also actually means that less expensive EVs could become more expensive, and vice versa.
Why? Because of the current Vehicular Emissions Scheme (VES). VES gives a car a rebate or penalty depending on its tested emissions score. Most BEVs get the maximum A1 rebate of S$20,00, while more powerful BEVs only get A2, S$10,000. The Land Transport Authority’s official press release states in its calculations that VES is not included in its sums presented below as “the schedule of VES rebates may change in 2021.”
If we know our LTA speak well enough, that means the current VES scheme – which ends December 31, 2020 – will no longer be in effect. What that means for buyers is that all BEVs now qualify for what is effectively, in current terms, the maximum VES A1 rebate of S$20,000.
Hence, we’re sad to say that the price of most EVs will not change much come January 1, 2021, because most of the ‘mainstream’ BEVS, including the MG ZS EV, Hyundai Kona EV, BMW i3S, Hyundai Ioniq Electric, Kia Niro EV all qualify for VES A1 already.
Larger, more powerful luxury EVs, such as the Audi E-Tron, Jaguar I-Pace, and Tesla Model X qualify for VES A2, a S$10,000 rebate. Effectively, the prices of those cars would drop by S$10k.
BEVs are more expensive than regular cars, which is why a 45 percent ARF rebate is often worth more than the VES S$20k rebate.
The math of the 45 percent ARF rebate that’s capped at S$20k also means that any BEVs will an OMV less than S$32,000 will suffer – the BYD E6 for example will become S$5,960 more expensive. Larger, more powerful luxury EVs, such as the Audi E-Tron, Jaguar I-Pace, and Tesla Model X qualify for VES A2, a S$10,000 rebate. Effectively, the prices of those cars would drop by S$10k.
It took us major spreadsheet punching to understand all this, so if you’re still confused, the takeaway is this: The new EV rebate will make cheaper EVs – with an OMV of less than S$32,000- more expensive and expensive EVs cheaper.
In practical terms, ‘cheap’ EVs will simply not exist in 2021. Vehicle distributors will probably end up selling higher-spec EVs with higher OMVs to maximise the ARF rebate.
On the other hand, you probably will not see a BEV that costs less than S$32k OMV, or roughly S$130k with COE list price, because if simply won’t make financial sense.
As usual with early announcements regarding cars and car prices, the picture is far from complete and we suspect it won’t be until the 2020 elections are over.
We don’t see the VES system being phased out, our guess it that there is likely still going to be a rebate/penalty system for all cars. Keep in mind there is a stated goal of phasing out combustion engines by 2040, so who knows, perhaps the taxes on all regular cars will go up in the name of progress?
We should also keep in mind the above is assuming that the current VES scheme is not renewed come the end of 2020. If it is, and EVs get a VES rebate on top of EEAI, then mainstream EVs will become cheaper by up to S$20k each. But that’s not likely, because the Government giveth and the government taketh away, often more of the latter. So the more cynical among you, which is most of you, will say that is the likely case.
And even so, if EEAI is ‘in addition’ to any VES rebates, this happens: If a BEV already has a S$20k VES rebate, and gets an additional S$20k rebate, it could end up with zero ARF payable, although the legislated minimum is S$5,000 for ARF.
Yay at first, but that would also mean you get less money back if you decide to de-register the car, ie. the Preferential Additional Registration Fee, or PARF, is a percentage of ARF paid you receive when de-registering a car before it reaches 10-years of age.
Currently that is the case for VES rebates – effectively you are paying for the rebate by receiving less money back upon early de-registration, but the effect of having a lower up-front cost is the bonus here.
Mr Heng said that it will also revise the current road tax scheme from January 2021, which will result in lower taxes for BEVs and hybrids.
“This will lead to an across-the-board reduction in road tax for EVs and some hybrids,” he said.
Currently, BEVs pay an eye-watering amount of road tax – a Tesla Model X for example, pays more than twice the road tax (S$8,374) of a Ferrari Portofino (S$3,724).
Images from the Land Transport Authority that describe the new scheme show a revised road tax of S$862 per year for a BEV with a 100kW (134hp) motor. Currently a Hyundai Kona EV with a 135hp motor pays S$1,306 a year in road tax, while a 1.6-litre petrol car pays S$742 per year.
However the Government will also adjust the road tax payable for such vehicles and introduce a ‘lump-sum tax that will be built into the road tax schedule for EVs’, since they do not contribute to fuel excise duties.
Leaving aside the logic of taxing BEVs precisely for their non-combusting nature, Mr Heng said that the total road tax will be higher ‘for some EV models’, but buyers will still see ‘substantial cost savings’ overall because of the EEAI.
The LTA’s calculations include insurance, maintenance, and other costs, not just charging/fuel costs (see photo).
Ironically, this could mitigate any significant cost savings that drivers would get from owning an EV – charging an EV is far less expensive than petrol even factoring in per-km energy usage, while maintenance costs are less since EVs need less mechanical upkeep than ICEs.
But if by 2023, the additional lump sum effectively almost doubles a BEV’s road tax, then it’s difficult to see any significant change in the status quo. It’s difficult to predict the total cost involved but an additional S$400-S$700 isn’t exactly chump change, and could easily cover the additional service costs of a regular ICE car.
To sum up, prospective BEV owners don’t have much to look forward to.
Think about it: Most BEVs will stay the same price overall, while the cost of ownership might actually go up for you by 2023.
But it might even be hard to find an EV costing less than S$130k with COE. You’ll pay less road tax in 2021, but more road tax after that, and unless you have your own personal charge point, it’ll be difficult to juice up.
Besides the national piggy bank who gains from all this? Hybrids.
Assuming they don’t also get hammered into expensive oblivion by the New Possibly ICE-Killing VES, they benefit from lower road tax, like EVs, but you don’t need to eventually pay the extra EV lump sum road tax which offsets your fuel savings.
Hybrid tech sounds old now – it’s been viable for decades – but it still has plenty of potential for fuel and environmental saving simply because it’s not widespread (hmm we wonder why…).
Like the experts have been telling us for a long while, the road to cleaner motoring is a slowly-amping up spectrum, not an instant electric jolt.