Car dealers adjust prices ahead of 2021 VES rebates

Singapore

JOE Biden and Donald Trump may have been, respectively, a big winner and loser early this month, but next year the car industry here will see its own crop of both.

On Thursday the Land Transport Authority announced revisions to the Vehicular Emissions Scheme (VES), with the anti-pollution scheme's rebates set to increase by S$5,000 on New Year's Day, and its surcharges increasing by the same amount from July 1 onwards.

Currently, VES makes relatively clean cars cheaper by entitling them to a S$10,000 or S$20,000 rebate on their Additional Registration Fee (an upfront tax), depending on what comes out of their tailpipes. By the opposite token, pollutive cars incur surcharges of S$10,000 or S$20,000.

By adding S$5,000 to the size of each stick and carrot, the LTA expects to increase its effectiveness. It says that sales of passenger cars in the cleaner VES A1 and A2 bands increased by around 60 per cent between the third quarter of 2018 and the first quarter of this year, while sales of pollutive C1 and C2 models fell by about 20 per cent. When it comes to vehicle emissions, it seems a tax is the best form of defence.

But even though the new rebates only kick in next year, some car dealers have already adjusted their prices to reflect the S$5,000 change. For example, the Mazda 3 qualifies for a VES A2 banding, which gets a S$15,000 rebate next year. Local importer Eurokars Group now sells it at S$83,888 with Certificate of Entitlement, S$5,000 cheaper than earlier in the week. The price applies if the customer is willing to wait until January to register the car.

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Likewise, Tan Chong Motor Sales states on its Nissan price list that figures are "applicable for registration from 1 January 2021." It also says that registering the Nissan Serena e-Power (a seven-seater with a VES A2 banding) within this year requires a S$2,000 top-up from the customer.

One marketing manager for a Japanese brand told The Business Times that his company decided to adjust prices immediately for the sake of "transparency" and to let customers make their buying decision with eyes open.

Not every clean car will benefit from next year's VES change, however. The Mitsubishi Attrage qualifies for a S$10,000 rebate today, but it is still liable for the minimum S$5,000 ARF set by the LTA. When next year's S$15,000 rebate kicks in, the Attrage will still incur the same ARF, so its S$68,999 price tag is unlikely to change.

Higher-end cars, which tend to attract VES surcharges because they are typically larger, more powerful and thus more pollutive, are less likely to be affected because S$5,000 is a small amount, relative to their retail price.

The BMW 318i, for example, will incur the S$5,000 surcharge next July, but that is unlikely to be a deal-breaker to someone in the market for a car that costs S$199,888. The surcharge amounts to a 2.5 per cent increase in the BMW's price. For more expensive cars, the impact is even less.

But if there's one group of cars that stands to benefit when 2021 comes around, it is electric vehicles (EVs). On top of the new VES rebates, battery-powered cars will be entitled to an EV Early Adoption Incentive (EEAI) rebate of 45 per cent of ARF, capped at S$20,000. This puts the maximum possible incentive at S$45,000.

The S$5,000 minimum ARF means some EVs may not get the full rebates, but combining the benefits of VES and EEAI will still lead to meaningful savings. The MG ZS EV, for example, could see its rebates rise by S$11,041 next year. That would lower its price from S$122,888 today to around S$111,000 in 2021.

Tan Chong Motor Sales has already dropped the price of the Nissan Leaf to S$134,800 if the customer agrees to take delivery in January - S$20,000 less than if they want the car this year.

One communications manager for a multi-brand franchise said most customers are willing to wait until next year if it means paying less now. "It's actually only 11/2 months away," he said.

That being so, some dealers are cutting prices ahead of the new rebates to lock customers in before they take effect.

Even if customers are biden their time, dealers want to trump rivals.

READ MORE: Singapore gears up for cleaner cars with bigger rebates, EV battery leasing