Singapore (Feb 21): There were plenty of immediate buffers but Budget 2020 has also mapped out longer term policy goals for dealing with climate change.
Come 2040, all vehicles with internal combustion engines, or simply those that run on petrol or diesel, are to be replaced by either electric vehicles (EVs) or hybrids. DPM Heng Swee Keat announced an EV Early Adoption Incentive (EEAI) incentivising people to buy fully electric cars and taxis through a rebate of up to 45% on the Additional Registration Fee. Rebates will be capped at $20,000 on these fees taxes levied during vehicle registration.
This incentive, costing some $71 million, will be introduced between Jan 1, 2021 and Jan 31, 2023, and will have the effect of lowering up- front costs of an electric car by 11%.
Singapore can certainly make do with more EVs. As of Sept 2019, there were around 1,600 EVs in Singapore. This is a big jump from just 12 units back in 2015. However, the number today is just a mere 0.17% of the total car population here. In contrast, the corresponding proportion in Hong Kong is 10-fold higher at 1.8%.
Terence Siew, president of the EV Association of Singapore, is cheered by Heng’s 2040 plan but does not expect a boom in the car population.
“The vehicle population growth in Singapore can be carefully controlled via the 10-year Certificate of Entitlement (COE) system,” Siew explains, adding that the government can possibly tighten the timeline as EV technologies improve and become less costly.
In fact, Siew sees the expansion in charging infrastructure – from the current 1,600 charging points to 28,000 planned by 2030 – as more important in aiding the long-term sustainability of the transition to EVs.
Car makers like BMW cheer the 2040 goal as well, but cautions “a lot of moving parts” has to come together to make it a reality. “First, it will be important for the government to align closely with industry players in terms of the roadmap, so manufacturers can adjust their product portfolios accordingly,” says Preeti Gupta, corporate affairs director at BMW Group Asia.
In addition, the charging infrastructure has to be installed in locations that tie in with normal commuting patterns, such as the work-place and housing estates, and not just public spaces. According to BMW’s experience, more than 80% of charging takes place either at home or at work. “There is a lot of room to promote the usage over electrified options by providing additional incentives, such as free parking and charging,” she adds.
While Singapore, with its high density, compact size, and obsession with cars despite their hefty prices, is ideal for EVs to take off in a big way, the transition will have a “major impact”
on Singapore’s tax revenues, which enjoys a$1 billion a year contribution from fuel taxes. “They are also a form of mileage tax, which discourages excessive driving, especially in private cars and thus helps to reduce road congestion,” notes Heng.
With no fuel excise duties for EVs, the tax structure will be altered. “Ideally, we would like to implement a usage-based tax on these vehicles as an alternative to fuel excise duties. But the technology to do this properly is the next-generation ERP (electronic road pricing) system and distance-based charging using ERP is still several years away,” Heng points out.
To partially defray the loss in fuel excise duties, the government will impose a lump-sum tax into the existing road tax schedule. The move will be phased across three years from January 2021 to January 2023. And while this will mean higher road taxes for some EV models, Heng believes buyers still can benefit by taking advantage of the significant early adoption incentive.
