Reduced PARF rebates may boost sales of new EVs, secondhand cars: Analysts

Changes to vehicle rebate rates are poised to disproportionately impact electric vehicle owners, with those owning higher-value cars potentially facing significantly larger reductions in rebates when scrapping their vehicles. The adjustments, stemming from new PARF (Prevailing Open Market Value) rates, are expected to favor Chinese EV brands due to their generally lower market values.

How Open Market Value Impacts Rebates

The new rates are tied to the Open Market Value (OMV) of a vehicle. A lower OMV translates to a lower Additional Registration Fee (ARF), and subsequently, a smaller PARF (Preferential Additional Registration Fee) rebate when the vehicle is scrapped before five years. According to data from OneMotoring, in January, BYD models had a median OMV of S$28,359.

Did You Know? In January, the median Open Market Value for BYD EV models was S$28,359.

This contrasts with other brands. Tesla’s five models had a median OMV of S$49,433, Volvo’s five EV models at S$48,539, and Audi’s four EV models at S$43,263. After applying standard rebates, Chinese EVs often have a minimal ARF payable.

The Financial Impact

Associate Professor Walter Theseira from the Singapore University of Social Sciences explained that “Most (Chinese EVs) have an ARF that is very close to the rebate limit and so they have hardly any PARF to speak of.” For example, a BYD model with an OMV of S$28,359 would incur an ARF of S$31,703, reduced to S$1,703 after rebates.

A Tesla model with a median OMV of S$49,433, however, would incur an ARF of S$65,923, falling to S$35,923 after the same rebates. Because the PARF rebate is a percentage of the ARF, the reduction in the PARF rate will have a greater impact on vehicles with higher OMVs.

Expert Insight: The structure of the rebates means that owners of more expensive vehicles are likely to experience a larger absolute loss in rebate value when scrapping their cars.

Illustrating this, a BYD scrapped before five years could receive S$1,277.25 under the current PARF rate, decreasing to S$510.90 under the new rate – a difference of S$766.35. A Tesla, in the same scenario, would see its rebate fall from S$26,942.25 to S$10,776.90, a difference of S$16,165.35.

What Could Happen Next

the changes could influence purchasing decisions, potentially leading to increased demand for Chinese EV brands. A possible next step for consumers may be to reassess the total cost of ownership for different EV models, factoring in the revised PARF rates. Analysts expect that the impact on the resale value of higher-OMV EVs could also be a consideration for current owners.

Frequently Asked Questions

What is OMV?

OMV stands for Open Market Value, and it is used as a basis for calculating vehicle taxes, and rebates.

How does ARF work?

ARF, or Additional Registration Fee, is calculated as a percentage of the OMV. Rebates, such as the VES and EEAI, can reduce the amount of ARF payable.

What is PARF?

PARF, or Preferential Additional Registration Fee, is a rebate given when a vehicle is scrapped before five years. The amount of the rebate is pegged to a percentage of the ARF.

How might these changes affect the long-term adoption of electric vehicles in Singapore?