Written by: Benjamin Bala
The Off-Peak Car (OPC) scheme was implemented in 1994 to replace the Weekend Car Scheme, which itself was implemented in 1991. Under the OPC, car buyers are given a range of incentives. Chief among which – besides the reduced registration fees and tax rebates – was the upfront cash rebate of S$17,000.
In the 19 years that have gone by since, the scheme was revised once in 2010. Under the new scheme, car buyers who register their new cars under the Revised Off-Peak Car (ROPC) scheme will enjoy a flat discount of up to S$500 on annual road tax (down from S$800 under the old scheme), subject to a minimum road tax payment of S$70 per year (up from S$50 under the old scheme). Yet, importantly, the upfront cash rebate of S$17,000 remained unchanged in value after the revision. Considering the escalating car prices from 1994 to 2012 in Singapore, the rebate offered under the ROPC is outdated and has outlasted its use-by date.
Under the ROPC, cars are allowed on the roads between 7pm and 7am on weekdays, and all day on weekends. Additionally, cars registered under the ROPC can be driven all day on public holidays and all day on the eves of five major public holidays (New Year, Lunar New Year, Hari Raya Puasa, Deepavali and Christmas).
33.5% LESS DRIVING TIME
Let’s take a look at some quick calculations now. A normally registered car is allowed on the roads all day throughout the year. That is, a normally registered car is allowed on the roads for 24 hours x 7 days = 168 hours per week. Taking 52 weeks in a year, that adds up to 168 hours x 52 weeks = 8,736 hours per year.
A car registered under the ROPC is allowed on the roads for 12 hours a day on weekdays, and all day on Saturday and Sunday. So in an average week, that makes 12 hours x 5 days + 24 hours x 2 days = 108 hours per week. This is 60 hours fewer than for a normal car, or 35.7% less in terms of permissible driving hours.
On an annual scale, an ROPC car’s usable hours include all day on public holidays, as well as all day on the eves of five major holidays (as mentioned above). This means that on a public holiday, an ROPC car enjoys an additional 12 hours on the roads, and another additional 12 hours on the eves of public holidays. The assumption here is that these public holidays and the eves of the five major holidays fall on weekdays.
Typically there are 11 public holidays in a calendar year here in Singapore. In this case, an ROPC car enjoys 108 hours x 52 weeks + additional 12 hours x 11 public holidays + additional 12 hours x 5 major public holidays = 5,808 hours per year. This is 2,928 hours fewer than for a normal car, or 33.5% less in terms of permissible driving hours.
The purpose of the cash rebate offered under the ROPC should serve one and only one purpose: to incentivize the registration of cars under the scheme. However, the insufficient value of the rebate has severely undermined its usefulness. A rebate of $17,000, against the backdrop of a 33.5% reduction in road utility for ROPC cars, is commensurate only with a car priced at around $50,721.[1] Indeed, it is plausible that a mid-range car – which should be the focus of our attentions – such as a Toyota Corolla did cost there or thereabouts in 1994 and for some years after.
As we all know, COE prices have skyrocketed in recent times. In the first bidding of January 2013, the COE premium for small cars (1,600cc and below) hit a record high of $92,100. This was $10,211 higher than the previous round of bidding. With that, the price of our archetypical Toyota Corolla Altis Classic (1.6A) reached $146,988.[2] At this price, a commensurate level of rebate should be around $49,265, in order for the ROPC to fulfill its purpose.[3]
RISING DEMAND FOR MID-RANGE CARS
A quick look at the price charts for the Toyota Corolla Altis shows us that the price for the more expensive 1.8A model began decreasing from its peak of $171,988 on 8 November 2012. However, the price of the less expensive Toyota Corolla Altis Classic (1.6A) and the Toyota Corolla Altis Elegance (1.6A) have not decreased since 8 November 2012, which at the time had also represented a peak in terms of prices for both cars.
The rising prices for smaller, mid-range cars shouldn’t come as a surprise for a country with a rapidly growing middle-income group. It is this large group that is struggling most with the escalating car prices. Car ownership in Singapore is by no means an absolute necessity. Given the well-developed public transport system and relatively inexpensive taxi service, commuters in Singapore are able to get around without much difficulty. This, despite the well-publicized shortcomings of the service providers.
To many, car ownership is still regarded as a priority. It will be a difficult task to try and change the mindsets of the majority of residents in Singapore into refraining from car ownership. People will always want a certain quality of life, and a certain level of comfort, for themselves as well as their families.
In my JC days, when I began dreaming about owning my first car, I always said I wanted to get an off-peak car – a second-hand off-peak car, even. My reasons were although I wanted to own and drive my own car, I didn’t want to pay the exorbitant parking fees at my workplace; I didn’t want to pay ERP rates every morning on my way to work; and I didn’t want to contribute to the peak-hour traffic. I just wanted something I could drive around in the evenings, or if I’m out late at night and it’s difficult getting a taxi, or on weekends, when I’m out with my friends or family. I wanted a car, but I wanted to be sensible about it. To me, the OPC scheme seemed a clever idea.
As I got older, I saw car prices going up and up and up. But the OPC and the ROPC scheme appeared to get stuck in antiquity. As a student of Economics, I couldn’t help but use numbers to try and make a rational decision. To me it’s more than clear that the ROPC fails to properly incentivize the registration of cars under the scheme.
INSUFFICIENT INCENTIVE
At the current price of $146,988 and a rebate of $17,000, the ROPC offers a rebate that is equivalent to 11.6% of the new car’s price. This is compared to the 33.5% less driving time per year a driver gets. Put in words, the cash discount one gets is about three times less than the driving time he or she has to sacrifice.
It is my strong opinion that the ROPC needs to be updated in order for it to serve its purpose again. In an article featured on Channel NewsAsia dated 10 June 2012 (click here for link), it was reported that the demand for off-peak cars have “dropped drastically”, mainly on the back on rising COE premiums.
It is understandable that many would opt to register their cars normally, instead of receiving the meager rebates on offer if they were to register under the ROPC scheme. With their normally registered cars, it is then understandable that commuters would want to drive them everywhere they go – because they’ve already paid so much for them. With the right incentives in place, the ROPC scheme will once again prove to be a meaningful avenue for aspiring car owners who do not intend to use their cars all time. More importantly, a properly implemented scheme will also go some way to alleviating the traffic congestion on Singapore roads during peak hours, with fewer drivers feeling compelled to make maximum use of their painfully paid-for cars.
[1] Simply calculated as $17,000 divided by 33.5%, to give $50,721.
[2] According to publicly available data from SGCarMart. Same with subsequent price mentions.
[3] Calculated as 33.5% of $146,988, to give $49,265.
The author is an Economics graduate who currently pursues freelance and independent research.
