Petrol tax hike won't see quick switch to electric vehicles: car rental firms

Singapore

RAISED petrol duties could end up hurting passengers of private-hire cars in Singapore, as car rental firms are unlikely to switch to electric vehicles immediately.

Rental firms The Business Times spoke to said they would look into eco-friendlier vehicles only further down the road, citing a lack of affordability and infrastructure.

To further discourage the use of petrol-powered vehicles, petrol duties were raised on Tuesday, by 15 cents per litre for premium-grade petrol and 10 cents per litre for intermediate-grade petrol.

The hikes, announced by Deputy Prime Minister and Finance Minister Heng Swee Keat in his Budget speech, amounted to 23 per cent and 18 per cent, respectively, for premium petrol and intermediate petrol.

Varying rebates in petrol duties and road taxes will be extended to affected vehicle owners to ease the transition. The expected revenue increases will be paid out through offsets, expected to cost about S$130 million.

Drivers of private cars, petrol or petrol-hybrid taxis and private-hire cars, for instance, will receive a one-year, 15 per cent road tax rebate. In addition, the taxi and private-hire cars will get a S$360 petrol duty rebate, paid out over four months.

Commercial vehicles, including goods vehicles, goods-cum-passenger vehicles, as well as buses, will have their road taxes waived for one year.

Motorcycles will receive a one-year road tax rebate of 60 per cent. Individual owners of smaller motorcycles, up to 400cc, will also receive S$50 or S$80 in cash, depending on the engine capacities of their vehicles.

All road tax rebates will take effect from August this year, while the additional petrol duty rebates for motorcycles, taxis and private-hire cars will be introduced by the middle of 2021.

Eddie Loo, managing director of the CarTimes Group, said petrol duty hikes could exert a "temporary shock" on private-hire car drivers, but the tax will likely be passed on to consumers.

"I don't think it will significantly accept the take-up rate for our rental cars because these drivers need their jobs, you know," Mr Loo said. His company has seen a utilisation rate of up to 97 per cent in recent times.

There is an ongoing plan to renew the fleet with cleaner modes of transport, but the idea of electric vehicles haven't quite taken off in Singapore, he added.

"There are not many parking and charging spots, and not many models to choose from. Singapore is quite a small market for the manufacturers," he said.

Michael Lim, who owns the Motorway Group of car rental companies, also said electric vehicles are inconvenient for private-car rental drivers. "Currently, the infrastructure is still not there. EVs don't really provide advantages for mass-market consumers, we probably won't look into offering them until at least a year later," he said.

However, Lionel Yeo, a spokesman for private-hire community FirstLane, said drivers are likely to have to absorb the increase in petrol costs, unless ride-hailing operators change fare structures.

"We might see more drivers switching to more fuel-efficient vehicles like hybrid or electric cars due to rising fuel costs," he said.

Member of Parliament Yeo Wan Ling, a director of the National Trades Union Congress (NTUC), said the NTUC is cognisant that many freelance drivers and riders will feel the pinch of higher fuel costs, despite the rebates offered.

"At the tripartite level, the NTUC will engage drivers, riders, and the platform operators and look at ways of providing additional support through our internal funding mechanisms," she said.

foodpanda's head of logistics Lim Zheng Gang said the government's move corresponds with the company's eco-friendlier transport alternatives over the years.

More than a third of its fleet comprises non-petrol vehicles, such as e-bikes and bicycles. Discounted rates are offered to riders who rent e-bikes from their partners.

"Following the raise in petrol duties, we will reach out to the riders to determine the effects of the hike, and explore ways of managing the higher petrol fees if necessary," Mr Lim said.

Mr Heng said in his speech that usage-based tax has helped shift consumer behaviour towards a more efficient use of fuel, or environmentally-friendly alternatives.

The government restructured diesel taxes in 2017 and 2019, to shift away from lump-sum taxes to a usage-based tax system.

Taxi companies have since made strides toward cleaner vehicles, such as petrol hybrids and electric taxis, the minister said. The proportion of diesel taxis in their fleet more than halved, he noted, from 86 per cent in 2015 to 42 per cent in 2020.

Raising petrol duties builds on this momentum, Mr Heng said.

But a car-lite society will continue to be Singapore's main goal, the minister stressed.

"Public transport is, after all, the cleanest and most efficient mode of transport," he said.

In March last year, the government announced that over S$60 billion will be channelled towards expanding and renewing the country's rail network over the next decade.

KEY POINTS

• Raised petrol duties.
• Varying amounts of road tax rebates for all petrol-powered vehicles.
• Additional petrol duty rebates for taxis, private-hire cars, motorcycles and commercial vehicles.