SINGAPORE: Two schemes aimed at steering car owners towards cleaner-energy vehicles have been extended, but with some revisions, the Land Transport Authority (LTA) and the National Environment Agency (NEA) announced on Monday (Sep 8).
The Vehicular Emissions Scheme (VES) will run for another two years until Dec 31, 2027, while the Electric Vehicle (EV) Early Adoption Incentive (EEAI) will be extended to Dec 31, 2026, before being phased out.
Not sure what these changes mean, or how they affect your next car purchase? Here’s a breakdown.
Introduced in 2018, VES offers new car buyers financial rebates or surcharges to their Additional Registration Fee (ARF) for their vehicles, based on how pollutive their vehicle is.
ARF is a tax paid when registering a vehicle and is calculated based on a percentage of a vehicle’s open market value - the cost of a vehicle imported into Singapore.
Under VES, cars are categorised into five emission bands based on pollutants such as carbon dioxide, hydrocarbons, carbon monoxide, nitrogen oxides and particulate matter.
The VES, which has been extended to Dec 31, 2027, will see revisions to its bands, rebates and surcharges.
The updated scheme will only offer rebates to EVs, with hybrid vehicles no longer qualifying for rebates. In addition, more pollutive vehicles will also incur higher surcharges.
A new banding structure will also take effect.
Vehicles currently in band A2 will be recategorised into the neutral band B, which no longer qualifies for rebates. Bands B, C1 and C2 will shift to bands C1, C2 and C3 respectively, resulting in higher surcharges ranging from S$15,000 (US$11,680) to S$45,000.
For instance, the Honda Jazz, currently in band A2, will no longer benefit from its current VES rebate of S$2,500 when it shifts to neutral band B in 2026.
Meanwhile, a Toyota Alphard, currently in band B, will incur a surcharge of S$7,500 in 2026 and S$15,000 in 2027 once it is downgraded to band C1.
There will be no changes to pollutant thresholds.
EEAI, the early adoption incentive scheme, encourages people to choose fully electric cars and taxis by giving buyers a 45 per cent rebate on their ARF, currently capped at S$15,000.
However, the cap will be reduced to S$7,500 from Jan 1, 2026, and the incentive will cease completely after Dec 31, 2026.
This is the second extension following the scheme's introduction in 2021.
Under the revised VES and EEAI, EV buyers can expect to save up to a combined cost of S$30,000 off their ARF in 2026, and up to S$20,000 in 2027.
The S$0 ARF floor for EVs and taxis will also be maintained until the end of 2027.
Therefore, a buyer of a BYD Atto 3 in 2026, for example, with an open market value of S$31,500 and an ARF of S$36,100 before rebates, will have to pay an ARF of S$6,100 after rebates.
This is compared to the current ARF of S$0 after rebates, a reduction in savings of S$6,100.
If you’re eyeing a base-level Tesla Model 3 - with an open market value of S$44,847 and an ARF of S$57,210 before rebates - you could pay more once the revised rules kick in.
Today, the ARF payable after rebates is about S$17,210. From 2026, this will rise to S$27,210, an increase of S$10,000, as rebates are scaled back.
LTA and NEA said on Monday that the revised schemes reflect the narrowing cost gap between electric vehicles and internal combustion engine models.
From January to August 2025, 80 per cent of newly registered cars and taxis were cleaner energy models, with about half being electric models.
“The overall benefits will continue to be tapered as Singapore gets closer to 100 per cent cleaner energy vehicles by 2040, in support of our national target to achieve net-zero emissions by 2050,” said LTA and NEA.
“Since 2021, more than 39,000 electric cars and taxis have benefitted from the VES rebates and/or EEAI,” they added.
A short-term increase in COE prices is expected, said LTA and NEA, while "strongly" encouraging potential car buyers to be prudent in bidding for COEs.
Commenting on this, transport analyst Walter Theseira said that the recent increase in COE prices was driven by market speculation due to the uncertainty over what would happen to the EV rebates come next year.
“I wouldn’t be surprised if some people were buying and some dealers were selling based on the projection that you might not actually have any of these rebates after the end of the year,” said Assoc Prof Theseira, who is also with the Singapore University of Social Sciences.
“The lack of policy clarity probably, in part, may have contributed to people deciding to pull forward their purchases of cars now.”
He added that this would have been a factor as to why COE prices have surged to new highs lately.
Earlier this month, the COE premiums for smaller cars closed at a record high S$107,889 to surpass the previous peak of S$106,000 in October 2023.
He said that the question is now whether, for next year, a fall in the maximum combined VES and EEAI rebates from S$40,000 this year to S$30,000 next year would be worth stomaching.
He said that it may be very well worth waiting, as the best-selling Chinese EV car models are actually "completely unaffected” by the reduction.
This is because for many of these cars, their ARF is below S$30,000, and the rebates are meant to offset the ARF, but cannot reduce the ARF to below S$0.
Hence, if a car’s ARF is S$28,000, the maximum rebate a driver can actually get is S$28,000, even if the scheme theoretically offers S$40,000.
“From a buyer’s and a car dealer’s perspective, is there really a need to rush? Because you are not going to be losing the entire amount,” he said.
He added that the COE supply will continue to increase until the end of the decade, based on the 10-year cycle in supply.
This means that the COE prices could, in theory, fall by over S$10,000 next year due to the supply increase, and entirely offset the fall in rebates.
“The buyer should ask himself, yes, I don’t get the full S$10,000, but what if the COE price declines by a large fraction? It’s basically putting money from one bucket into another, it’s still the same depreciation in the end,” he said.
“If you don’t need your car right now, I would not really advise anyone to rush and beat the deadline.”
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The Vehicular Emissions Scheme (VES) will run for another two years until Dec 31, 2027, while the Electric Vehicle (EV) Early Adoption Incentive (EEAI) will be extended to Dec 31, 2026, before being phased out.
Not sure what these changes mean, or how they affect your next car purchase? Here’s a breakdown.
What is VES and how will it change?
Introduced in 2018, VES offers new car buyers financial rebates or surcharges to their Additional Registration Fee (ARF) for their vehicles, based on how pollutive their vehicle is.
ARF is a tax paid when registering a vehicle and is calculated based on a percentage of a vehicle’s open market value - the cost of a vehicle imported into Singapore.
Under VES, cars are categorised into five emission bands based on pollutants such as carbon dioxide, hydrocarbons, carbon monoxide, nitrogen oxides and particulate matter.
The VES, which has been extended to Dec 31, 2027, will see revisions to its bands, rebates and surcharges.
The updated scheme will only offer rebates to EVs, with hybrid vehicles no longer qualifying for rebates. In addition, more pollutive vehicles will also incur higher surcharges.
A new banding structure will also take effect.
Vehicles currently in band A2 will be recategorised into the neutral band B, which no longer qualifies for rebates. Bands B, C1 and C2 will shift to bands C1, C2 and C3 respectively, resulting in higher surcharges ranging from S$15,000 (US$11,680) to S$45,000.
For instance, the Honda Jazz, currently in band A2, will no longer benefit from its current VES rebate of S$2,500 when it shifts to neutral band B in 2026.
Meanwhile, a Toyota Alphard, currently in band B, will incur a surcharge of S$7,500 in 2026 and S$15,000 in 2027 once it is downgraded to band C1.
There will be no changes to pollutant thresholds.
What is EEAI and how will it change?
EEAI, the early adoption incentive scheme, encourages people to choose fully electric cars and taxis by giving buyers a 45 per cent rebate on their ARF, currently capped at S$15,000.
However, the cap will be reduced to S$7,500 from Jan 1, 2026, and the incentive will cease completely after Dec 31, 2026.
This is the second extension following the scheme's introduction in 2021.
How much can EV buyers save under the new rules?
Under the revised VES and EEAI, EV buyers can expect to save up to a combined cost of S$30,000 off their ARF in 2026, and up to S$20,000 in 2027.
The S$0 ARF floor for EVs and taxis will also be maintained until the end of 2027.
Therefore, a buyer of a BYD Atto 3 in 2026, for example, with an open market value of S$31,500 and an ARF of S$36,100 before rebates, will have to pay an ARF of S$6,100 after rebates.
This is compared to the current ARF of S$0 after rebates, a reduction in savings of S$6,100.
If you’re eyeing a base-level Tesla Model 3 - with an open market value of S$44,847 and an ARF of S$57,210 before rebates - you could pay more once the revised rules kick in.
Today, the ARF payable after rebates is about S$17,210. From 2026, this will rise to S$27,210, an increase of S$10,000, as rebates are scaled back.
Why are the incentives being cut?
LTA and NEA said on Monday that the revised schemes reflect the narrowing cost gap between electric vehicles and internal combustion engine models.
From January to August 2025, 80 per cent of newly registered cars and taxis were cleaner energy models, with about half being electric models.
“The overall benefits will continue to be tapered as Singapore gets closer to 100 per cent cleaner energy vehicles by 2040, in support of our national target to achieve net-zero emissions by 2050,” said LTA and NEA.
“Since 2021, more than 39,000 electric cars and taxis have benefitted from the VES rebates and/or EEAI,” they added.
How will these changes affect car prices and COE premiums?
A short-term increase in COE prices is expected, said LTA and NEA, while "strongly" encouraging potential car buyers to be prudent in bidding for COEs.
Commenting on this, transport analyst Walter Theseira said that the recent increase in COE prices was driven by market speculation due to the uncertainty over what would happen to the EV rebates come next year.
“I wouldn’t be surprised if some people were buying and some dealers were selling based on the projection that you might not actually have any of these rebates after the end of the year,” said Assoc Prof Theseira, who is also with the Singapore University of Social Sciences.
“The lack of policy clarity probably, in part, may have contributed to people deciding to pull forward their purchases of cars now.”
He added that this would have been a factor as to why COE prices have surged to new highs lately.
Earlier this month, the COE premiums for smaller cars closed at a record high S$107,889 to surpass the previous peak of S$106,000 in October 2023.
He said that the question is now whether, for next year, a fall in the maximum combined VES and EEAI rebates from S$40,000 this year to S$30,000 next year would be worth stomaching.
He said that it may be very well worth waiting, as the best-selling Chinese EV car models are actually "completely unaffected” by the reduction.
This is because for many of these cars, their ARF is below S$30,000, and the rebates are meant to offset the ARF, but cannot reduce the ARF to below S$0.
Hence, if a car’s ARF is S$28,000, the maximum rebate a driver can actually get is S$28,000, even if the scheme theoretically offers S$40,000.
“From a buyer’s and a car dealer’s perspective, is there really a need to rush? Because you are not going to be losing the entire amount,” he said.
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He added that the COE supply will continue to increase until the end of the decade, based on the 10-year cycle in supply.
This means that the COE prices could, in theory, fall by over S$10,000 next year due to the supply increase, and entirely offset the fall in rebates.
“The buyer should ask himself, yes, I don’t get the full S$10,000, but what if the COE price declines by a large fraction? It’s basically putting money from one bucket into another, it’s still the same depreciation in the end,” he said.
“If you don’t need your car right now, I would not really advise anyone to rush and beat the deadline.”
Continue reading...