Singapore, Only Eco-Friendly Cars Will Survive

Ban on Internal Combustion Engine Vehicle Sales by 2030

Concerns over Tax Revenue Decline and Market Shrinkage

Toyota, Honda, Benz, Hyundai

Competitive Landscape Among Top 4 Domestic Brands

[Asia Economy Singapore Correspondent Su-mi Seo] Singapore plans to phase out the operation of internal combustion engine vehicles such as gasoline and diesel cars by 2040, alongside the promotion of eco-friendly vehicles.

According to local media including The Straits Times on the 17th (local time), the Singapore Ministry of Finance recently included this policy in the '2020 Budget Plan,' explaining that it is a decision aimed at preventing climate change caused by carbon emissions and protecting public health.

Accordingly, all vehicles registered in Singapore will be gradually converted to eco-friendly vehicles such as electric vehicles (EVs) and hybrids by 2040. In particular, from 2030, ten years from now, the sale of internal combustion engine vehicles will be banned within Singapore. Instead, an early adoption incentive program for EVs will be introduced, providing government support covering 45% of vehicle registration fees, up to a maximum of 20,000 Singapore dollars (approximately 17 million Korean won, and 30,000 Singapore dollars for taxis) when purchasing passenger cars and taxis as electric vehicles. The Land Transport Authority (LTA) of Singapore estimates that if this support program runs from next year until January 2023, it will cost about 71 million Singapore dollars.

Currently, electric vehicles account for only 0.18% of all vehicles in Singapore, totaling 1,125 units, with just 1,600 charging stations. Due to Singapore’s limited land area, high vehicle prices, and insufficient charging infrastructure, EV sales have not been effective. Particularly, the Singapore government is promoting the creation of a dedicated industrial cluster through the EV boom, but experts hold a negative view due to high labor costs and other factors.

Despite these challenges, the Singapore government shows interest in the EV business because it is environmentally friendly and can be nurtured as a new growth engine. To this end, efforts are being made to establish an EV cluster. Last year, British electronics company Dyson announced plans to build an EV factory in Singapore. It is reported that the Singapore government offered favorable conditions such as tax benefits to attract EV production facilities. Although Dyson later withdrew the plan citing profitability issues, it was clear that the Singapore government actively courted the company. Hyundai Motor Company is also positively considering establishing some EV production lines in Singapore. There is also a forecast that Singapore’s EV promotion policies will send positive signals to the market, attracting more multinational companies to enter Singapore.

The Singapore government first recognizes the need for EV popularization and has begun preparing concrete plans to increase the number of charging stations. Since EVs require charging time of a certain duration, increasing the number of charging stations to secure accessibility is important. To this end, the government plans to expand the number to 28,000 by 2030 in cooperation with private companies.

However, switching to EVs is expected to inevitably create a 'hole' in fuel tax revenue amounting to 1 billion Singapore dollars (approximately 846.4 billion Korean won). To address the tax revenue decline caused by the spread of EVs, the Singapore government is reportedly considering applying taxation based on usage time or distance instead of fuel consumption tax on EVs.

Some raise concerns that this decision may further shrink Singapore’s domestic automobile market. In recent years, shared vehicle services such as Grab, Go-Jek, and Tada have taken hold, reducing vehicle demand, and the high price of EVs may further discourage vehicle purchases. The top four domestic brands in Singapore?Toyota, Honda, Benz, and Hyundai?may face a situation where they have to compete over a shrinking market share.

This content was produced with the assistance of AI translation services.