Car dealers see changes to CEVS as overkill

Singapore

THE bands and rebates of the Carbon Emissions-Based Vehicle Scheme (CEVS) were likely tweaked because the government expects revenue from motor-vehicle taxes to eventually stagnate with an increasing supply of Certificates of Entitlement (COEs), some motor distributors speculate.

It was reported last year that CEVS resulted in the government giving tax breaks to more cars than it had expected. But dealers say upcoming changes to the scheme means virtually all cars except a couple of hybrid models are affected, which seems to be a disproportionate response to the revenue loss. It could even amount to overkill when some diesels, which are renowned for their lower carbon dioxide emissions, are going to be hit.

CEVS is being extended for another two years from July 1, 2015, but with refinements. These involve lowering the carbon dioxide limits for rebates and surcharges, although the top band, A1, will see a generous rebate increase from S$20,000 to S$30,000. At the same time, the lowest band, C4, will hike the surcharge for gas-guzzlers from S$20,000 to S$30,000.

As a result, popular models in the small car category will experience a S$5,000 cut in CEVS rebate. Only one small hybrid gains from the new and stricter emissions, with its rebate increasing by 50 per cent to S$30,000.

A small car in the COE Category A has an engine below 1,600 cc and 130 hp. For example, the Honda Jazz 1.5, which now attracts a S$10,000 rebate for its 127 g/km of carbon dioxide emission in the A3 band, will move down to A4 for S$5,000 from July onwards. But more significantly, Singapore's favourite model in 2014, the Toyota Corolla Altis, with CO2 emissions of 151 g/km, falls from A4 with a S$5,000 rebate to the carbon-neutral B band or S$0.

Last year, 1,867 units of the Altis were sold by authorised distributor Borneo Motors Singapore, or a more than S$9.3 million savings for the government from just one model alone had the new CEVS rule been applied.

This is why some dealers believe the new scheme will cushion the impact to ARF (Additional Registration Fee) when the COE quota expands. ARF is a registration tax which starts from 100 per cent of a car's OMV (Open Market Value).

With more COEs, more mass-market cars are purchased, as opposed to when the COE supply is restricted. Between 2011 and 2013 when the quota shrank, for example, premiums spiked up and luxury cars became Singapore's No 1 models in those three years - the BMW 5 Series, Mercedes-Benz C-Class, and Mercedes-Benz E-Class, respectively.

"Mass-market cars are cheaper than luxury cars, which means less ARF," said the general manager of a Japanese dealership. "This will lead to less motor vehicle taxes collected. Maybe not this year but in subsequent years when the quota continues rising as the number of deregistrations goes up."

Last year, 28,932 passenger cars were registered, of which almost 43 per cent were Cat A cars. This year, the market is expecting total registrations to at least double to 60,000 cars. In 2009, when 68,862 cars were registered, nearly 56 per cent were Cat A models.

"Together with the petrol tax hike, it looks like this is a revenue-balancing exercise," said the general manager. He pointed out that the government has forecast motor vehicle taxes to rise 17 per cent to S$2.12 billion in FY2015.

"But it could slow down beyond that, especially if the yen and euro remain weak," he added, referring to the two currencies most commonly used in the trade of new cars here. When the yen and euro are low, OMV is lower, and hence so is ARF.