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VES to hurt mass-market buyers more than super-luxury

Wednesday, March 15, 2017 - 05:50

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The new Vehicular Emissions Scheme (VES) will benefit the high-end car market while hurting buyers of bread-and-butter models, with the latter likely to spark a rush for COEs this year, say some dealers.

Singapore

THE new Vehicular Emissions Scheme (VES) will benefit the high-end car market while hurting buyers of bread-and-butter models, with the latter likely to spark a rush for COEs this year, say some dealers.

This is because those buying more expensive cars with bigger petrol engines will actually pay a lower maximum surcharge, while many volume models are set to lose their rebates and possibly incur a S$10,000 surcharge.

VES will replace the current Carbon Emissions-based Vehicle Scheme (CEVS) on Jan 1, 2018. It is more stringent and in addition to carbon dioxide (CO2), measures four new pollutants - hydrocarbons (HC), carbon monoxide (CO), nitrogen oxides (NOx) and particulate matter (PM).

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In general, petrol engines emit more CO2 than any of the other four components, which are included to discourage diesel models.

Additionally, CEVS's current nine bands of four surcharges and benefits each, plus one neutral band, will be collapsed into five VES bands - two rebate/surcharge bands each and one neutral band.

While the maximum rebate or surcharge for cars is now S$30,000, it will drop to S$20,000 next year.

The current maximum surcharge is levied when CO2 emissions exceed 230 g/km. Under VES, the cap will be lowered to anything above 185 g/km. But while it is stricter, the penalty is also lower.

"If someone comes in to buy a V8 or V12 model today, he has to pay a S$30,000 surcharge. But if he buys it next year, he only pays S$20,000. That is effectively a S$10,000 discount,'' said the director of sports car dealership.

Cars which are now slapped with the maximum surcharge are those in the super high-end segment, with some of the brands being Aston Martin, Bentley, Ferrari, Lamborghini, McLaren and Rolls-Royce. Several top-of-the-line Porsche sports models are also included in this group, along with high-performance variants from BMW and Mercedes-Benz.

The director of the sports car dealership added: "Because of this, I expect some of my prospective customers to delay their purchases to next year when the VES comes into effect. Even though S$10,000 should be a negligible amount for them, considering they are buying something that costs over S$600,000.''

On the other hand, those looking at more modest cars may end up having to pay extra because of the tighter standards. This is due to many COE Category A mass market models currently enjoying the lowest S$5,000 rebate for emitting 121-135 g/km of CO2. Under VES, the lower S$10,000 rebate will only be achieved with 90-125 g/km of CO2. The neutral CO2 band will also be tightened to 125-160 g/km from 136-185 g/km now.

One example is the Mazda3 family sedan or hatchback, which will be penalised with a S$10,000 surcharge next year based on its CO2 emissions, from a S$5,000 rebate today.

"It is even more ironic when you consider that it has the latest direct injection technology, while some Japanese models with older engine technology will remain in the neutral band,'' said a senior executive at the Mazda dealership, who declined to be named.

The impeding surcharge has also created some urgency to secure a COE, at least at Kah Motor's showrooms. Nicholas Wong, the general manager of the authorised Honda distributor, said showroom traffic is "at least 30 per cent higher''.

"With the uncertainty over prices, buyers prefer to lock in the price now when it is still affordable,'' said Mr Wong.

Some popular Honda models that will be affected include the Civic and HR-V, with their current S$5,000 rebate slipping into the neutral band next year. But the six-seater Jade will rise from neutral to a S$10,000 surcharge.

For other dealers though, VES does not seem to have resulted in a significant spike in buying interest.

The senior executive at Mazda said: "Next year is still a long way away. Maybe they will be more motivated closer to the deadline.''

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