Tax reduction makes diesel-powered passenger cars cheaper to own

Christopher Tan, Straits Times 16 Feb 08;

IT WILL be less punitive to own a diesel-powered passenger car from July, a development that should be a boon for European marques such as Mercedes, BMW, Audi and Volkswagen.

The Government has announced that it will reduce the supplementary tax for diesel cars, reversing a 30-year stance that has made these vehicles much costlier to own than petrol models.

The National Environment Agency (NEA) had maintained for years that diesel cars - even newer and cleaner models - produced more particulate matter, a fine soot that could cause serious respiratory ailments.

From July 1, however, diesel cars that meet the stringent Euro IV emission standard will attract a supplementary tax of $1.25 per cubic cm of its engine displacement.

For bigger cars, this works out to half or less of the previous amounts. A 1,600cc model will attract a supplementary tax of $2,000, down from $2,976 now; a 2,000cc, $2,500 from $4,856; and a 2,500cc, $3,126 from $7,200.

The new tax is subject to a minimum of $1,250 per year.

'This is certainly good news for us,' said Audi Asia- Pacific spokesman Pauline Cheah. 'Audi is a market leader in this segment. In a lot of markets, our turbodiesel cars sell very well.'

Mr Say Kwee Neng, managing director of multi-brand agent Vantage Automotive, said: 'This is very interesting for us. We have a 2.7 litre diesel Land Rover and a 2.2 litre Peugeot, among others.'

Mr Say said he would study the new scheme carefully before deciding which models to bring in.

Ms Belinda Bay, a spokesman for BMW agent Performance Motors, said the firm would 'certainly consider' offering diesel Beemers.

Mr Karsono Kwee, who owns multi-brand Trans-Eurokars group, said: 'We will probably start with diesel models of the Saab 9-3, Opel Astra and Opel Vectra.'

Diesel advocates have long been lobbying for diesel cars to be made more assessable. German car parts maker Bosch, for instance, argues that motorists in Singapore will save more than $600 million worth of fuel a year if all cars here are diesel-driven.

Singapore would also cut emissions of carbon dioxide, which causes climate change, by about 300,000 tonnes a year.

The NEA is not moved, saying even Euro IV diesel cars emit more soot and nitrogen oxide - another pollutant - than their petrol equivalents.

There is only one privately-registered diesel car in the Republic - a Mercedes owned by taxi company CityCab.

Will consumers bite now?

Businessman Leslie Chia, 43, said: 'I use a turbodiesel when I am in Germany. If it can be brought in at a competitive price, I will consider.'

Watch importer Leslie Chang, 43, said: 'Last time, when you drive a diesel car, you had to sacrifice performance. But no longer.'

However, he added that it would make economic sense 'only if you clock more than 25,000km a year'.

Petrol costs around $2 a litre before discount, versus $1.50 for diesel. Diesel typically offers 30 per cent better mileage than petrol.

A Daimler manager said diesel cars would be more attractive to fleet management companies than individuals, unless the latter spends $600 or more on fuel a month.

Road tax for clean diesel cars to be reduced from July 1
Samuel Ee, Business Times 16 Feb 08;

THE revised road tax for Euro IV diesel-engine passenger cars will only be attractive to those who travel long distances or who enjoy the powerful acceleration of such cars, say some motor distributors.

In a sign that the dirty, pollutive image of diesel vehicles is slowly changing, yesterday's Budget announced a revised special tax structure for Euro IV private diesel cars from July 1. Currently, a private diesel car which complies with the stringent Euro IV emission standard has an annual road tax four times that of a normal car. For example, the special tax of a 1,600cc diesel car in July 2008 - when road tax will be cut by 15 per cent - will be $2,972, or four times the normal road tax of $743.

But this will be changed to an absolute-dollar tax based on the engine capacity of the car, at a rate of $1.25 per cubic centimetre (cc) of engine capacity, subject to a minimum tax of $1,250.

So a 1,600cc Euro IV diesel car will pay a special tax of $2,000 - 1,600cc multiplied by $1.25 per cc - or roughly equivalent to 2.7 times its road tax.

The revision was made in recognition of the improved emissions of Euro IV diesel cars for both particulate matters and carbon dioxide, and the fuel efficiency of diesel engines.

'The current special tax on private diesel cars is too punitive, and explains why we only have one such car on the road today,' said Finance Minister Tharman Shanmugaratnam. 'The changes will narrow the difference in the cost of fuel consumption that a motorist faces, between a Euro IV car and a petrol car.'

Some car companies are already doing their sums and calculating whether it will be worthwhile importing diesel models into Singapore.

'We have to look into this further and we will make our decision after we check it in more detail,' said Volkswagen Group Singapore managing director Olaf Duebel. 'VW's diesel technology is the diesel benchmark in Europe as well as in some Asian markets.'

One consideration for Dr Duebel is that diesel models can cost as much as 25 per cent more than equivalent petrol models in Europe because VW's turbodiesel engines cost more to make.

But the savings in fuel costs and the good low-end torque from diesel power should offset this, said some observers. At $1.52 per litre, the pump price of diesel is about 45 cent less than the cheapest grade of petrol, or about 23 per cent. Diesel engines are also more efficient, consuming at least 25 per cent less than a petrol engine of equivalent displacement.

'If you drive long distances or if you own a leasing company, then a diesel passenger car will be good,' said a senior executive representing a premium Continental make. He said that in the urban context, a 2.2-litre diesel engine burns nine litre per 100km travelled. On the other hand, a 2.2-litre petrol unit will require 12.5 litres for the same distance.

As for road tax, the 2.2-litre diesel model's will be $2,750 versus $1,446 for the petrol car. This $1,304 difference works out to almost $110 extra a month for the former.

'I estimate that in Singapore, you need to travel at least 2,000km a month to make it worthwhile to buy a diesel model,' he said. 'So it all comes down to how much will it cost you per kilometre travelled.'

But there are also enthusiasts who enjoy the higher torque of the diesel-powered car, which improves acceleration and makes it more fun to drive. This group will not mind paying a premium for diesel, said the executive.

Authorised Honda distributor Kah Motor, for example, believes it is well-positioned to benefit from this revision. The Japanese car maker has a newly developed i-DTEC engine capable of meeting Euro V emission levels. This 2.2-litre unit produces 150 hp and a whopping 350 Newton-metres of torque at just 2,000 rpm.

'It is an excellent engine for powering large-class Honda cars such as the Accord and the CR-V,' said Kah Motor product manager Vincent Ng. 'With the revised road tax structure, we will now pursue the introduction of diesel engine variants for these two models.'

Distributors welcome revision to special tax on Euro-IV diesel cars
Channel NewsAsia 16 Feb 08;

SINGAPORE: Vehicle distributors have welcomed the revision to the special tax on Euro-IV diesel cars announced in the Singapore Budget speech, saying that the change makes it cheaper to own diesel cars and will open up a new market for car makers.

Presently, drivers of diesel cars pay a special tax on top of the road tax. From July, the special tax will be revised from the current four times the road tax to an absolute-dollar tax based on the engine capacity of the car, at a rate of $1.25 per cubic centimetres (cc) of engine capacity, subject to a minimum tax of $1,250.

With the revision, car owners will save between 32% and 56% on the special tax, depending on the engine capacity of the car.

This is good news for motorists like Mohammed Fairuz. He has just bought a new car but he said he would consider switching to a Euro-IV diesel-powered one in the future.

"If it's environmentally friendly....if it gives you the same performance at a cheaper rate, why not?" he said.

Dealers say diesel-powered cars, which are popular in Europe, offer a smoother ride. But some motorists have their reservations.

"There is of course a psychological barrier to diesel for most of us private consumers. We would look for petrol-driven cars first. To switch to diesel, we must be very convinced by test drives," said motorist Stanley Gan.

Honda may roll out diesel variants of its existing models in Singapore in 2010, at the earliest.

Kah Motors, which distributes Honda cars, says it is working with the research departments in Japan and Thailand to tap this new market.

Dealers say a Euro IV-compliant diesel car will cost 10 to 15 percent more than petrol-driven ones.

This, along with the additional taxes, can only be offset if the annual mileage crosses 25,000 kilometres.

"If you look at a litre of diesel and a litre of petrol, you already save 50 cents. Each litre of petrol compared to a litre of diesel, it actually gives you less fuel economy. So if you use diesel, you could gain up to 30 to 40 percent of extra mileage, so the more you drive, the more it makes sense," said Vincent Ng, product manager at Kah Motors.

The Motor Traders Association said Singaporeans will need time to get used to the concept of a diesel-powered car.

Its take-up rate will depend on how government policy is shaped.

The association added that a contention with diesel cars is that they contribute to pollution.

Environmentalists Channel NewsAsia spoke to, said currently Euro-IV diesel cars still emit a strain of pollutant.

But they expect the new Euro-V diesel vehicles to be as clean as petrol-powered ones and will also be more fuel efficient.

The new Euro V-compliant engines will be available in Europe next year. - CNA/ir