What's next for electric vehicle incentives in Singapore?

Across the world, we're seeing electric vehicle (EV) uptake rise. That's to be expected. With global warming and subsequent tightening legislation, companies are being pushed to produce more EVs. Many companies have already announced intentions to go fully electric. 

Customers, too, have reason to go electric. Whether its low emissions zones, ICE bans, general environmental awareness, or in many cases simply more economical sense, we've seen EV uptake rise sharply in many countries. 

One of the biggest incentives for drivers is, well, financial incentives. Whether it's through up-front grants, tax rebates (or in some cases exemptions), or other forms of monetary incentives, we've seen countries such as Norway, the UK and China rapidly increase EV ownership (though it's worth highlighting that such incentives are being phased out or reduced in many places). 

But here in Singapore? Incentives exist, but it's a rather less promising story. 

Incentives are not quite what they seem

Here, we have something called the EV Early Adoption Incentive (EEAI). It is, according to the Land Transport Authority (LTA), an incentive to encourage people to switch to EVs. With the EEAI, buyers are offered a rebate on the car, on top of the rebate that comes with the VES system. 

However, it is worth looking deeper into the numbers, because of how both rebates work - the rebates come out of the Additional Registration Fee (ARF) of the car, and thus affects the Preferential Additional Registration Fee (PARF) value of the car (how much you get back when deregistering the car after 10 years), which makes for some complex calculations. Put simply, this isn't as straightforward as a "10 per cent off" or "$20,000 off" discount. Of course, that is on top of an already complicated tax system, complete with tiered ARF. 

We want to figure out (based on some math) just how much you are saving on a car as a result of the EEAI and VES rebates. So, we have trawled through all available data on Sgcarmart's New Car Page, and the resulting figures are interesting to note. 

*Data from Sgcarmart, all figures correct as of Aug 14, 2023.

Here, we've looked at EVs across all price ranges, and also calculated how much that same car would cost assuming no incentives were offered at all. By calculating the implied PARF and total cost of each model, we can calculate an "actual savings" figure, and compare that against the rebates received. We've assumed that each car takes the maximum loan amount and period, with an interest rate of 2.78 per cent, and is deregistered after 10 years. Additional costs like road tax and insurance have not been factored into the total cost calculation. 

What is most notable is that for most cars, the actual amount of money saved is quite a bit less than what you might expect if you simply add up the VES and EEAI rebate amounts. Put simply, the rebate is not as simple (or as much) as it seems. 

There are three groups here: EVs with $0 PARF, EVs with implied PARF less than the $60k cap, and EVs with PARF capped at $60k - broadly identified as entry-level, premium and luxury. 

For entry-level EVs, the actual savings vary slightly, but your actual savings are anywhere between 33-36 per cent less than the actual rebate amount. 

For EVs that fall into that middle, premium tier, your actual savings are specific: $27,754, or about 38 per cent less than the full $45,000 rebate amount. 

As you cross the $60k PARF mark, your "savings" improve, but not particularly much. What's interesting, if perhaps absolutely unsurprising, is that you only start to actually save more money because of rebates when you get to the super expensive models - cars like the Audi RS e-tron GT and BMW iX. Here, the effect of the tiered ARF, combined with the cap on PARF value, subsequently means that your savings actually out-pace the rebate amount. However, it's probably also worth pointing out that shoppers in this particular segment are perhaps less price-sensitive than those in the entry segment, and that all savings have to be taken in context - a $50k saving on a $800k car (about six per cent) is, percentage-wise, not as significant as a $30k saving on a $200k car (15 per cent). 

In actuality, what this means for most people is that the rebates being touted, while no doubt is a rebate, is not as 'much' as people may perhaps think it is - as a whole, more than 35 per cent less than is "advertised". 

What's next? 

The EEAI is set to expire at the end of this year. There's no official word yet from the LTA whether the EEAI will be extended, adapted, or done away with altogether. And as we've previously evaluated, even with the current EEAI, an EV is not actually cheaper than an equivalently-priced ICE car. 

So, what's next? 

Claudius Steinhoff, President & CEO, Mercedes-Benz Singapore, tells us, "A pullback on incentives may result in a slower rate of EV penetration, which may inhibit our ambitions for a zero-emissions transport landscape in the future. We continue to strongly support national initiatives in building and enhancing the EV ownership ecosystem."

Markus Schuster, Managing Director, Audi Singapore, is more bullish on Singapore's electric transition. "With current EV maturity levels in the Singapore market, ecosystem elements such as charging infrastructure, product availability and range of automaker offerings tend to have longer-term impact on consumer decision making - compared to temporary measures such as government tax structures and other top-down incentives. The overall cost of owning an EV is comparatively lower than that of an ICE vehicle, and it is important for this to remain so for the long-term mainstream adoption of EVs." 

When we reached out to the LTA, a spokesperson tells us, "To encourage an early transition to cleaner energy vehicles, time-bound schemes such as the EEAI and the ARF floor reduction for fully electric cars and taxis aim to narrow the cost gap between electric and internal combustion engine vehicles before cost parity is reached. These schemes are being reviewed, and more details will be announced before the end of this year." 

How can people be driven to go electric? Of course, it takes exposure and education (something we're certainly in the business of doing), and the overall charging infrastructure needs to (and will) continue to improve. But, ultimately one suspects that it will come down to the wallet. 

The Government has to explicitly and actively want drivers to go electric, and the relevant incentives should reflect that. For now, we shall await LTA's next announcement, and evaluate further from there. 

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This article was first published in sgCarMart.