Singapore Considers New Feebate System For Car Certificates

Public Support For New Vehicle Certification Framework

Singapore is reviewing a proposed overhaul of the Certificate of Entitlement (COE) system to better distinguish between mass-market and luxury vehicles. Transport Minister Jeffrey Siow recently announced that a public consultation revealed majority support for a “feebate” scheme. This system would introduce rebates for lower-value cars and surcharges for high-end models, ensuring a permanent price distinction that has recently blurred due to the rise of electric vehicles (EVs).

Currently, the system divides cars into Category A and B based on engine capacity and power. However, advances in vehicle technology have allowed manufacturers to adjust EV power outputs via software, enabling luxury EVs to qualify for Category A. This has led to instances where Category A premiums exceeded those of Category B, undermining the original intent of the categories. To address this, the Land Transport Authority (LTA) proposes merging these into a single category for cars while using a feebate system based on the Open Market Value (OMV) of the vehicle.

Preferences For A Five-Band System

During the consultation, most respondents expressed a preference for a five-band system over a three-band option. A more granular five-band structure is intended to reduce “cliff effects,” where a small increase in a car’s value could lead to a significant jump in the surcharge or a loss of a rebate. Under the current proposals, the difference between the highest surcharge and the largest rebate could reach S$30,000, though the LTA has also considered options where the maximums are set at S$15,000.

Members of Parliament have raised questions regarding the transparency of these rebates. Minister Siow clarified that the intention is for the feebate to be applied directly to the COE price rather than through dealers. This ensures that the financial benefit reaches the buyer directly and is not absorbed into the dealer’s pricing. Additionally, the government is exploring ways to make it easier for individuals to bid for certificates on their own and is considering whether dealers should be required to publish car prices without the certificate cost.

Addressing EV Adoption And Family Needs

Concerns were raised about whether the new system would discourage the adoption of high-performance electric vehicles. The Minister explained that the government will not create a separate feebate structure for EVs to avoid unnecessary complexity. Instead, EV adoption will continue to be supported through the Vehicle Emissions Scheme. He emphasized that OMV serves as an effective proxy for a car’s value, regardless of the specific technological features that contribute to that value.

Regarding affordability for ordinary households, the government noted that certificate prices are driven by market demand and supply to control the total number of vehicles on the road. While an income-linked benchmark was suggested, the Minister stated this would be difficult to implement. However, the government is studying the possibility of a transport grant for large families who may find public transport challenging, particularly those with young children.

Prioritizing Public Infrastructure

Despite the push for more affordable car ownership, the government maintains that public transport must remain the priority. With roads already occupying more than 12 percent of the country’s land area, there is insufficient space for every household to own a vehicle. The Minister highlighted the financial necessity of the current system, noting that COE revenues have averaged S$5 billion annually over the last decade. These funds are critical for supporting the S$6 billion to S$7 billion spent yearly on public transport subsidies to keep fares affordable for millions of citizens.

The LTA expects to complete its review by the end of the year, with final findings and recommendations scheduled for publication in the first half of 2027. The feebate system is intended to be reviewed annually to adjust OMV thresholds and rebate amounts as market conditions evolve.