Clean diesel cars going nowhere

In the first three months of the year, the diesel car population only increased by a mere four
Joyce Hooi, Business Times 4 May 09;

CLEAN diesel cars are still non-starters in Singapore, and car companies are finding out the hard way.

Three car makers - Chevrolet, Alfa Romeo and Volkswagen - have introduced diesel variants to the local market to capitalise on the cut in a special tax on Euro IV cars that kicked in last July.

Volkswagen, which led the charge by introducing the Touareg R50, Touareg 3.0 TDI and Polo Bluemotion last July, has seen a muted response after almost nine months.

'Since the launch of sales of TDIs, our number of diesel passenger car sales is small at about 10 units,' says Olaf Duebel, managing director of Volkswagen Group Singapore.

Alfa Romeo has managed to move just one Alfa 159 1.9 JTDM turbo-diesel car since its launch last October.

And while General Motors says it is too early to comment on sales of the Chevrolet Captiva Diesel that was launched in February, a report from the Motor Traders Association for March shows not a single unit has been sold so far. The association accounts for most local car dealers except parallel importers.

The numbers are bleak. There were five diesel car models in the local market, but only 21 such vehicles in the local car population at end-March.

While the 2008 cut in the special tax on Euro IV diesel cars could have accounted for 13 of the 21 diesel cars added to the vehicle population that year, its effect pales in comparison to that of the Green Vehicle Rebate Scheme on hybrid cars.

In the first three months of the year, the diesel car population only increased by a mere four, while the number of hybrids swelled by 148.

The tax cut - a nod to Euro IV cars' improved carbon dioxide and particulate matter emission levels - made clean diesel cars cheaper options, but not cheap enough to appeal to drivers. The road tax payable on a 1,600cc petrol car is $744 annually, whereas a 1,600cc Euro IV diesel car will cost drivers an extra $2,000 in special taxes, at a rate of $1.25 per cc.

Car industry insiders have long questioned the rationale of the special tax on Euro IV diesel cars, given that a diesel car like the Polo Bluemotion is one of the lowest emitters of carbon dioxide, while the Alfa Romeo 159 1.9 turbo-diesel car is more fuel-efficient than its petrol equivalent.

'The current tax structure is more favourable towards what we term 'concept-oriented' cars - that is, hybrid and compressed natural gas (CNG) cars,' says Reinhold Carl, managing director of Audi Singapore. 'A more comprehensive approach should be 'results-oriented', based on consumption and emission levels, which will place diesel on par with hybrid and CNG vehicles.'

The ministry of finance (MOF), which makes vehicle tax policy, believes it is merely narrowing the gap between the higher cost of petrol and lower diesel prices.

'The special tax on private diesel cars was introduced in lieu of a volumetric excise duty, analogous to the tax per litre of petrol that petrol cars are subject to,' says an MOF spokesman.

The average car owner drives about 20,000km a year, but needs to clock up 25,000km to break even on a diesel car with special tax, according to David Tay, general manager of authorised Alfa Romeo dealer Euro Automobile.

Mr Tay reckons very few drivers manage to rack up 25,000km a year, placing the diesel car on the losing end of a cost-benefit analysis.

Kittichai Jarusrojpoka, managing director of General Motors ODC Singapore, says: 'We feel more people would consider buying diesel-powered cars if not for the special tax, especially since diesel is priced 18 per cent lower than petrol.'

The poor response to diesel cars has made other carmakers pause before rolling out diesel variants.

Authorised Honda dealer Kah Motor, which expressed interest in launching diesel variants of the Honda Accord and CR-V early last year, will no longer do so.

'We explored the introduction of diesel models with Honda Motor extensively in Singapore last year and concluded that due to the still rather high annual taxes, ownership of a diesel-powered passenger car still will not make sense. And that was concluded with diesel and petrol prices at their peak,' says Vincent Ng, product manager for Kah Motor.

'Now, with diesel prices and petrol at current levels, the marketability of diesel passenger cars has become even more uncertain.'

Audi, however, remains unfazed. Special tax or not, it will introduce the A5 3.0 TDI diesel car in Singapore this year.

'Our key objective with the A5 3.0 TDI was never to be a volume mover,' says Audi Singapore's Mr Carl. 'We wanted to open up the possibilities of diesel engines within our range of cars and use the opportunity to educate customers that diesel is the most viable alternative to bridge the gap between performance and eco- friendliness.'