Paradox in Singapore’s EV Economics

Singapore is a small, modern, urban, city-state that should have been well-positioned to be a haven for EV (electric vehicle) cars. The government seems to want to support greater EV adoption. The reality, unfortunately, seems to be a sad and unfortunate paradox in the city’s EV economics and policies.

The paradox began as far back in 2016. At that time, a used Tesla Model S imported into Singapore was slapped with a $15K surcharge under the Carbon Emissions-based Vehicle Scheme (CEVS), earning a C3 rating, which is the second worst you can get in carbon emissions. That’s right, an all-electric Tesla Model S was assessed to be one of the worst types of cars in terms of carbon emissions, so much that you had to pay a penalty. Singapore became the subject of some ridicule, not just locally but also abroad, because we considered many other conventional ICE cars to be less polluting than a fully electric vehicle.

It was only after Elon Musk had a word with the then Prime Minister of Singapore, Lee Hsien Loong, that the government adjusted its policies to make sense. Today, EV cars enjoy rebates under the Enhanced Vehicle Emissions Scheme (also known as Enhanced VES, which replaced the CEVS), as well as the new EV Early Adoption Incentive (EEAI).

However, now in 2025, I am still a little confused about the Singapore government’s position on EVs. Do they think EV is good, or do they not think it is desirable? Let’s dive into the economics of EV ownership in Singapore.

The first thing I want to talk about is the Enhanced VES and EEAI rebates. You see, these rebates sound like a discount on the EV’s total purchase price, or as we often refer to as the on-the-road price. This is the total cost you have to pay to drive the car out of the dealership onto the road.

Singapore’s vehicle tax structure is convoluted. The rebate from Enhanced VES and EEAI you receive is actually a discount on the Additional Registration Fee (ARF). Singapore encourages early car deregistration to promote a younger and more environmentally vehicle population. This is done by returning a portion of the ARF paid in the form of Preferential Additional Registration Fee (PARF) value when you deregister your car not later than 10 years old. The PARF value can be used towards registration of a new car or returned in cash.

It may not seem immediately obvious, but that rebate on the ARF means that for EV cars, you get less PARF value back at deregistration. It’s not a straight-up discount.

Anyone who thinks that Singapore is promoting EV adoption by giving you up to $40K discounts (maximum of $25K from Enhanced VES and $15K from EEAI) needs to be corrected. Your vehicle ownership costs are just being redistributed. Without the rebates, your costs are heavier up-front; with the rebates, your costs are lighter up-front, but you get less (or no) value back at end of 10 years. It is not a simple $40K discount like you might get

It will help to look at some examples with real numbers. Let’s consider the total depreciation cost of a car over 10 years, because ultimately this is what matters — how much did the car itself cost you. This is the difference between the on-the-road price and the PARF value at the end of 10 years, ignoring any scrap value for the body. We won’t address other running and maintenance costs just yet.

I’ll start by comparing the BYD M6 and the Toyota Sienta (hybrid), because I bought the former and was considering the latter. I understand they aren’t quite an apples-to-apples comparison, but they’ll do for now.

	BYD M6	Toyota Sienta
OTR Price	$177,888	$185,888
Applicable ARF	$0	$25,598
PARF Value @10year	$0	$12,799
Net Depreciation	$177,888	$173,089

The applicable ARF includes rebates from Enhanced VES and EEAI. Do you see how the Toyota Sienta, while initially costing more, ends up being cheaper in terms of depreciation? For those who like to think in terms of depreciation per month, that’s $1,482 and $1,442 for the BYD M6 and Toyota Sienta respectively.

We can also compare two very similar vehicles from BMW — the iX3 pure-electric and the X3 20 xDrive “mild” hybrid.

	BMW iX3	BMW X3
OTR Price	$338,888	$348,888
Applicable ARF	$43,477	$68,906
PARF Value @10year	$21738.50	$34,453
Net Depreciation	$317,149.50	$314,435

Two very identical cars, the main difference being that one is a pure electric vehicle, and which still costs more than the mild hybrid one.

I have another quick comparison between a BYD Atto 3 and Honda HR-V 1.5L.

	BYD Atto 3	Honda HR-V 1.5L
OTR Price	$172,388	$167,999
Applicable ARF	$0	$17,699
PARF Value @10year	$0	$8,834.50
Net Depreciation	$172,388	$159,164.50

It shouldn’t be entirely surprising that EV cars cost more. In the first place, EV cars are more expensive in terms of their actual purchasing cost from the manufacturers. However, despite comparing vehicles with similar OTR price, which is after taking into account any government incentives, the actual depreciation of the vehicle at 10 years consistently makes EV the more expensive choice.

This is most telling with the pair of BMW cars I used above for comparison. The Open Market Value (OMV) of the iX3 (EV variant) is almost $8K more expensive at $58,616, compared to $50,881 for the X3. The OMV is the so-called “actual cost” (as assessed by customs at import to Singapore), which reflects the price of the car in some other country without excessive vehicle taxes like ours. That means the iX3 should cost more, but its OTR ends up cheaper due to rebates, yet at the end of the day (or 10 years), it is the X3 that ends up with lower depreciation.

Let that that sink in for a moment.

This sounds very weird. The government seems to try to level the OTR price between EV and non-EV cars so that EVs become a viable consideration for car buyers. However, ultimately, the government is saying, let’s not kid yourself, we are not going to make EV more attractive in the 10 years of owning the car. The best-case scenario is that the government appears to see little to no benefit to having EVs.

Next, let’s talk about road tax. A petrol car like the Corolla Altis with 1598 cc engine displacement attracts a 12-month road tax of $742. This car produces about 96 kW of output. An EV car with a 96 kW motor attracts a 12-month road tax of… $1,480.

No, you are not reading that wrong. The equivalent-powered EV car gets slapped with a punitive $1,480 tax, comprising a $780 base cost which is not much different from the petrol-equivalent car, plus an Additional Flat Component (AFC) of $700 designed specifically to punish EV owners.

Why does Singapore need to hit EV cars with that $700 fixed surcharge? This is to partially offset the revenue loss from fuel excise duties which are not applicable to EVs as they don’t use petrol. This is quite ridiculous. The signal they’re sending out is that no matter whether you use petrol or EV, they’re going to treat all cars the same. Yes, a full electric car needs to be penalised so that it’s not different from a petrol car. How insane is that?

I understand the Land Transport Authority’s (LTA) policy aims to target car usage. Mark Tan, Group Director of Technology and Industry Development at LTA said: “EVs, while less pollutive, should not be exempt from usage charges, which have been levied by way of the fuel excise duty”. This is basically saying that EVs, while less pollutive, are equally discouraged on Singapore’s roads. It is just absolutely insane, the same as how the very same LTA could slap a significant carbon emissions penalty on a Telsa Model S back in 2016.

Furthermore, road tax does not target car usage. Mark Tan, or someone else at the LTA, must be hallucinating. The $700 AFC has no influence on how much one will drive. Conversely, this $700 AFC encourages EV car owners to drive more. Use the road more, because the more you drive, the more you make the $700 AFC forgivable.

The $700 AFC is a fixed cost, and it might as well be an ownership tax. Let me make this clearer. If you charge an extra $700 per year on the road tax for EVs, over 10 years that will be $7K. You are basically taking away part of the incentive from Enhanced VES and EEAI.

You see what I mean about the paradox in our insane policies. Give you a discount here, then slap a surcharge there. Sounds a lot like our shopping sales in Singapore. Retailers give you a discount, but not before marking up the prices first.

The LTA is an absolute embarrassment to Singapore. From their complete incompetence in managing rail transport to the royal mess they’ve made of the SimplyGo fare payment system, it is little different when it comes to EV car adoption. On the one hand they say they want to encourage EV adoption, but on the other, their actions say they don’t care.

The hardship of EV ownership doesn’t stop with the direct costs that LTA has full control over. EV owners face other challenges which I feel LTA is well-positioned to influence a more positive outcome. For example, public EV charging in Singapore is fairly expensive. While Singapore’s regulated tariff is 29.94 cents/kWh (with GST), charge point operators in Singapore, like Singapore Power which is the electricity grid operator, charges up to over 81 cents/kWh (with GST). That’s well over 2x more expensive. (Singapore Power that has one of the most expensive EV charging rate!)

I understand that public EV charging cost is subject to market forces, but I think LTA has a role to influence the cost of public EV charging. Compared to petrol stations, the infrastructure costs and operational costs of an EV charge point is far lower.

Insurance cost is another area of great prejudice against EV cars. Using FWD as the basis of comparison, for an experienced male, married, driver, a BYD Atto 3’s non-discounted insurance premium begins at $3,276.71. Had I owned a petrol-only Honda HRV, the premium drops to $2,573.85. A hybrid Honda HRV would cost from $2,286.83, the lowest of the three. That’s not at all an anomaly. The BMW iX3 (EV variant) and X3 cost $3,554.29 and 2,336.09 respectively.

The irony of owning an EV car in Singapore is that there is higher depreciation, higher road tax, and higher insurance. Basically, from an economic standpoint, EVs do not make sense. Economically, an ICE car is the better choice.

Hence, the big question I have for the government is, what really is your policy towards EV adoption in Singapore? The paradox in EV policies currently gives mixed signals about whether the government finds EVs desirable or not. Please make up your mind.

If the decision is to go all-in to support EV adoption, then here are some simple and obvious ideas that must be implemented. I am not here to just complain. I want to offer some solutions.

First and foremost, we need to make adjustments to our vehicular tax structure to properly incentivise EVs. I had thought to completely revamp and combine our complicated ARF, PARF, and COE systems into a single system, but admittedly that is quite a drastic change and may not end up any simpler if the system still needed to accomplish our road transport policies.

To properly incentivise EV adoption by giving up-front incentives in the purchase cost as well as in the lifetime depreciation cost, I propose that the rebates from Enhanced VES and EEAI be applied directly to the price of COE. The COE system can otherwise continue to function the same way as before, and understandably the price likely will go up because EV buyers will be able to bid more. In this way, non-EVs are disincentivised, while EVs are comparatively better off. By not reducing the payable ARF, the lifetime depreciation of EVs will not be worse off than non-EVs. Ultimately, this adjustment gives EV buyers a simpler and more direct discount.

Secondly, the $700 AFC on EVs needs to be removed. It does nothing to reduce car usage. As explained above, this is a clawback of the rebate given. Please don’t play mind games with EV owners — giving the illusion of a generous rebate, then clawing it back little-by-little over the next 10 years.

Next, we need more incentives for public EV charge point operators to not only build more infrastructure but also to attract new operators, so as to increase supply and increase competition. The goal is to increase the availability of charge points while reducing charging costs. I hope to see public EV charging rates at no more than 50% premium over the regulated electricity tariff.

Relating to the availability of charge points, we should make it mandatory for strata-titled properties, such as condominiums, to provide EV charging for a certain percentage of their car park lots, which should be substantially subsidised by the government. I understand there is already a grant available, but the take up is slow, because getting strata-titled properties to install EV chargers has been slow. The reason is that sometimes there is resistance from individual unit owners, or that the managing council drags their feet despite having approval from the management corporation to install them. It took many years for my condominium to pass a resolution to install EV chargers, and despite getting approval 9 months ago, no works have started.

Moving on, I have some further suggestions on incentivising EV adoption with some privileges.

1. Discounted ERP for EV. They contribute no pollution to our congested roads. Better for such roads to be occupied by EV than ICE cars.
2. More reserved parking for EV in car parks with high utilisation, such as those in shopping malls and central business district.
3. Explore the feasibility of allowing EV to use bus lanes during bus lane operation hours.
4. In China, EVs have a distinctive mark on their license plate to identify their EV status. We should adopt a similar scheme so that anyone can verify the eligibility of an EV to benefit from some of the above privileges. The visibility of EVs can also be an opportunity to encourage adoption.

These ideas have the objectives to make EVs more attractive to buy, to own, and to use. These will demonstrate the government’s resolve to support EV adoption, instead of just sitting on the sidelines paying lip service to Singapore’s Green Plan.