Debate on the President's Address

Debate resumed.

6.53 pm

Mr Ong Teng Koon (Marsiling-Yew Tee): Mr Deputy Speaker, I stand in support of the Motion. We can all see that the only way for a space-constrained environment like Singapore to continue to function effectively is to go for a car-lite strategy and it is laudable that we have taken significant steps in this direction.

However, the infrastructure required for Singaporeans to truly live in a car-lite way, such as a much denser network of MRT stations or even the advent of autonomous car sharing schemes, is still years away.

In the meantime, we continue to grapple with the issues around cars and car ownership. Coming from a district that is located far from the CBD, this is an issue that is top of the mind for many of my constituents

Today, I want to focus on three aspects. One, for a given number of cars in Singapore, as determined by COE quotas, how can we improve the allocation across households? Two, how do we improve transparency and avoid people over-paying for cars? Three, how can we move away from fossil-fuel burning combustion engines towards more sustainable alternatives, such as electric vehicles?

To briefly recap the current situation, as of 2015, we had about 540,000 passenger cars registered in Singapore. From the data, approximately 45% of households own at least one car, while 8% of households own more than one.

My question is this: should we institute measures to spread car ownership more evenly, allowing more families to own their first car, rather than having a significant portion of cars owned by families with multiple cars?

We all know of families that have elderly dependants or young children who would greatly benefit from owning a car, but feel that they have been priced out by high COE prices. At the same time, we come across families that have three, four or five cars, which almost certainly means that they are often under-utilised.

It is easy for us to take a pure free market perspective and say, "This is the market in action, this is the correct outcome". But even taking an economist's point of view, one can surely argue that, on average, the economic benefit of the first car to a household is greater than the benefit of subsequent cars. So, in aggregate, I believe we would create a better outcome for society if, for a given number of cars, car ownership were spread around more evenly.

How could one bring about a more even spread of cars? One solution would be analogous to our current policies in the housing market. Citizens looking to buy a second property pay an additional 7% stamp duty, which increases to 10% for the third or subsequent property. Could we not consider here an Additional Buyer's Car Duty (ABCD), which could be set as a percentage of the prevailing COE price, for those who wish to buy a second, third or fourth car?

Perhaps, a simple mechanism would be to step up the multiple of the price for each COE. Property investors also face tighter restrictions on mortgages – so, similar rules might be applied in the car loans market. The idea is to use these mechanisms to price some second car buyers out of the COE market, thereby lowering the price and improving affordability for first-car households. There should not be a significant revenue impact as some households will pay for the privilege of buying more than one car.

Whist this policy might not be straightforward to enforce, given that people could try to evade it, for example, by registering it under different members of the family. One solution there would be to base it on a combination of owner name and address, to close this loophole for family members living together.

Even if enforcement is not perfect and some households do manage to avoid paying more for their subsequent cars, that should not deter us from forging ahead with this policy if we agree that the outcome of greater distribution of car ownership is a desirable one. After all, Singapore's success is built on a history of tough policy decisions, so the difficulty of enforcement cannot be a show-stopper for us. And while this issue has been raised before, perhaps now is the time for us to act on it, given the challenges brought about by growing public perceptions of income inequality.

The second area I would like to discuss today is the question of whether we are paying a "fair" price for our cars. Our goal here today is not to pander to popular perception of "profiteering" by car dealers – I recognise that costs are high and a business needs to turn in a profit. Rather, my argument is that there is still room to improve transparency in car pricing.

Can we encourage or even mandate car dealers to explicitly show a breakdown of the cost of a car and show how much gross profit that they are making? This actually benefits both parties. If you read the online forums, there are often angry posts claiming that dealers make "obscene" profits of $50,000-$100,000 per vehicle, but this could reflect the fact that the public has imperfect information and, hence, miss out on important cost elements in their calculation.

Note that we are asking for information on gross, not net profits – that is, how much of the price of the car goes to pay for the cost of goods sold, including OMV, taxes, GST and other outgoings, excluding the dealer's rental and other costs. This greater clarity will help consumers make better decisions and, hopefully, spur dealers to offer better deals as well!

The final area I want to explore is what kind of vehicles we should have in Singapore. From a sustainability and pollution viewpoint, we need to explore alternatives to petrol cars. Diesel had shown some promise, but the recent scandal at Volkswagon has cast some doubt on the level of pollution that diesel engines cause. I feel that this is an area that requires further study by the relevant authorities and, perhaps, stricter checks are warranted on the emission standards of diesel engines until we have conclusive evidence that such engines do not pose health or environmental problems for the general public at large.

Another alternative to petrol combustion engines is electric vehicles. Many experts see EVs as a key part of a low carbon future and rapid advances in technology have made them affordable and pleasurable to drive. EV adoption is accelerating globally – the leader is Norway, where, due to strong incentives, around 30% of new cars registered are now electric.

In many ways, Singapore is an ideal market for electric vehicles. Our average driving distance is around 50 kilometres, far under the range limitation for existing models – and these range limits are expected to continue to increase with each generation of new cars.

Given our current tariff structure on petrol, drivers have an economic incentive to switch to EVs as they could generate significant savings on fuel each year. By some estimates, the combination of fuel savings, tax savings via the Carbon Emission-based Vehicle Scheme (CEVS) and expected lower maintenance costs already make it economical to own an EV, relative to more traditional internal combustion engine vehicles.

Given that EVs are still an emerging technology, there is even an opportunity for Singapore to capture a slice of the market if we position ourselves as a hub for EVs. New players and business models are emerging in the electric and autonomous vehicle space that could give Singapore an entry into the high-value added segments of the new automotive industry. This could create high-value knowledge economy jobs in segments, such as battery and charging technology research.

From a Government or public infrastructure perspective, Singapore is uniquely positioned to avoid the biggest obstacle to kickstarting EV adoption, which is the need to build a dense public charging network. This is because home charging would be sufficient for us. In large countries, the concern is running out of power before you complete your journey, especially for long inter-city routes. In Singapore, only a small fraction of users would be concerned about running out of power before they arrive home to charge. For those drivers, there are already charge points in most commercial buildings which could serve as emergency top-ups, if needed, providing additional security for users.

However, if we look at the current state of the market, excluding vehicles participating in Government trials, new reports suggest that there are only around 100 commercially sold EVs. In many developed markets, EV penetration is around 3%-5% of new cars. So, in the Singapore context, we would expect 600-1,000 EVs to be sold per year. Our low figure likely reflects a chicken-and-egg problem. There is no demand for EVs, therefore, there is no need to supply them and fewer models are available.

One major contributor to this situation is that more than 90% of Singaporeans live in high-rise homes and, hence, currently, do not have the right to install the required charge points in their common carparks, be they HDB or condominiums. Hence, they could not get an EV even if they wanted to. In response to the resulting low demand, many dealers have not brought in EV models and, hence, consumer awareness remains low.

Given the increasing pressure to reduce carbon emissions, should we be putting greater focus on EVs? LTA estimates that the typical EV produces around 85 grams of CO₂ per km because our electricity comes from natural gas. A typical combustion engine vehicle produces around 120-150 grams of CO₂ per km. Given that the average car drives around 17,000 km a year, this translates into annual savings of around 800-1,000 kg of CO₂ per vehicle per year. From the Government's perspective, this is a rare carbon emissions reduction policy where the abatement cost would be voluntarily borne by the consumers who choose to buy the EVs, rather than being paid for by the Government.

If we believe that this is a step in the right direction, then we need to look at how to make it easier for environmentally-conscious car buyers to buy a new car and install a charge point. HDB and BCA can take the lead for mandating access for installation and car dealers can include charge point installation in the price of the car, with financing provided if necessary. International benchmarks suggest that the cost of installing such chargers should be around $3,000, as they do not need to be the fancy, expensive, fast or rapid charging type – slow charging overnight would be sufficient for us.

While most carparks do not have designated individual lots, we could institute a scheme where, similar to handicapped access lots, certain lots within the carparks are earmarked for electric vehicles only. This number can increase over time, in tandem with the number of vehicles, so there is no need to build ahead of demand and the costs will be borne by the car buyers as part of their purchase price.

With this policy in place, public interest and commercial incentives should encourage car dealers to bring in their latest EV models and, hence, create a buzz and momentum among potential car buyers. It would not be unreasonable to expect the typical 3%-5% of new car sales typically observed internationallly, although my hunch is that we would see a higher end of the scale, given the driving patterns and fuel costs here in Singapore. This will in no way interfere with our journey towards a car-lite society, but just helps to make it a greener one for our future generations.

Mr Deputy Speaker, we have, over the last week, discussed many ways to make Singapore a safer, more inclusive society and how we can build a sustainable environment for the future. I believe that our policies on the distribution of car ownership and the type of cars we drive can contribute to these goals. With that, I would like to express my support for the Motion of Thanks to the President.