Last October, Singapore unveiled plans to develop a new road map to guide the Republic's key land transport developments over the next 10-15 years. One of the main aims of the comprehensive review of the 1996 White Paper on Land Transport was to make public transport a choice mode. Samuel Ee asks some of the major players in the automobile industry for their views on how such a plan could affect car sales in the new year, and if they foresee a rise in usage charges - like ERP, parking fees and even petrol taxes - in the near future if the use of the car for day-to-day commuting is discouraged.

Tan Kheng Hwee,
general manager of Kah Motor, the distributor of Honda

The number of cars sold in Singapore depends only on the number of COEs issued by the government and I believe the number of COEs to be issued in the next 10 years will be fewer and fewer each year, in line with lower scrappage rates. Since the number of COEs is limited and personal income and population will continue to rise, demand for cars each year will always exceed the number of COEs.

A smaller percentage of Singaporeans will still own cars but they may not need to use their cars all the time. I expect that if accessibility, reach and speed of public transportation improve, then the number of daily car trips should fall. It may become more convenient to use public transportation than to drive in the CBD.

It is obvious that the car population in Singapore will have to reach zero annual growth at some point. It just isn't possible to keep building more roads and car parks and to have more and more vehicles on the road. We need land for offices, factories, shops, restaurants, homes, recreational facilities and parks, not roads and car parks. Mass transit is the way to go in the near future.

ERP and parking charges are based on demand and supply. ERP will be based on demand for road usage and will be pegged to an acceptable level of congestion on that particular stretch of road. As for parking charges, in the future, the URA may continue to reduce the requirement by developers to build car parks, especially in buildings in the CBD, thus decreasing the supply of car parks.

The URA may also decide to tender out land for more productive uses rather than keep them as URA car parks. That will naturally cause parking charges to rise. The current market value of space in the CBD is at least $5 per square foot per month which means that the value of a parking lot is closer to $1,000 per month.

However, we cannot make driving increasingly expensive without first improving the speed and convenience of public transport. If public transportation remains inconvenient and parking and ERP charges become prohibitive, then people simply won't go downtown and business activity in the CBD will suffer.

ARF is supposed to be gradually reduced as we switch to usage charges. So I do expect ARF to be cut gradually. However, that will not reduce the price of new cars because if ARF is cut, COE prices will go up. Reducing ARF simply reduces the progressiveness of car taxes, thus reducing the retail price differences among various brands and models with different OMV. If ARF becomes zero, then there will no longer be a multiplier effect on OMV.

If usage charges increase significantly, the best-selling models will always be the practical and versatile family cars like sedans and MPVs, so models like the Honda Civic and Odyssey will still remain our best sellers.

With the reduced number of COEs to be issued in the years to come, the used car market will probably make a comeback as prices of new cars rise.

Cheah Kim Teck,
CEO of group motor operations of Jardine Cycle & Carriage, representing Mercedes-Benz, Mitsubishi, Kia and Citroen

Any effect on car sales won't be significant because the auto industry, in general, is a controlled population. If the scrappage is high, there will be an allowance for replacement as evidenced in the last couple of years and the market size is adjusted accordingly.

There isn't a direct impact because people will still want to own a car. Even if you have better public transport, people will still own one for their weekend leisure or a drive away.

I think current car owners will use public transport if it is more convenient. For example, for a lot of people, the MRT is not so accessible. There is no MRT up and down Bukit Timah, and the East Coast is another area where there are a lot of new condos but there is no train line. Many people say they drive because they have no choice.

Of course, there are bus services but they are not as convenient and buses invariably run into traffic congestion. And the bus fleet could be a lot more modern. Right now, they are not friendly to older people and the waiting time is not so regular. But comfort is very good in trains.

In Hong Kong and Tokyo, many businessmen take public transport but they still own a nice car. At 1 am after a party, they can still take the train home. So everything has to work hand in hand. You can't take a draconian approach and arbitrarily increase ERP and petrol taxes unless you have accessibility and convenience.

But if such charges go up, the first major impact will be on usage. People will use the car for their leisure needs. If there is any impact on car sales, my hunch is that it will be the budget type of cars. Those at the fringe are going to feel the pinch, and increases in road tax, etc, will make it a choice between entry and exit into the market. But for sedan cars and upwards, and we're not even talking about luxury models, as long as people are employed, they will be prepared to put up with the pain of owning a car.

Ownership is a big emotional factor. It is hard to articulate properly but it can be a great joy to bring your family out in a car because of the mobility, convenience and safety. And if you're on a date, it's nicer to be in a car holding hands than in a bus.

AC Neo,
marketing director of Tan Chong Motor Sales, which distributes Nissan

Public transport has always been, and we understand, remains, the government's choice mode of transport. The government has already put in place an excellent two-prong approach to private transport policy: reduce ownership costs and increase usage costs. This approach serves to satisfy Singaporeans' aspiration to own cars, while it judiciously manages traffic conditions through usage charges to minimise economic man-hour losses resulting from traffic jams. It has worked well for several years now, as car taxes are cut and ERP adjusted according to peak-time highway traffic conditions along with parking charges.

Moving forward, if usage costs are raised further, I believe the public will expect ownership costs to come down. If so, car taxes will be lowered, which, in turn, reduces the car cost. But car owners should be aware that while initial costs of ownership may be lower, usage costs will be higher in the long run. If usage charges increase significantly, the number of car trips will be lower. More will probably take public transport. However, it remains an aspiration for the young to own a car. Undeniably, cars are still objects of desire and a status symbol.

With the positive economic outlook for Singapore, especially with the impending IR projects, car sales should not be affected even if the government promotes public transport as a choice mode and raises usage charges for car owners significantly. Anyway, the business of motor vehicle sales depends mainly on the increase or reduction of the COE quota.

Karsono Kwee,
executive chairman of the Eurokars Group of Companies, which represents Porsche, Saab, Opel, Rolls-Royce and Mini

The number of new cars allowed on the roads each year is determined by the COE quota, with demand and supply regulating COE prices. Making public transport a choice mode will result in car sales being skewed in favour of the premium luxury segment and may negatively impact the entry level as marginal buyers would be tempted to switch to a public transport system that offers an upscale level of service at an affordable price.

In the premium luxury segment, vehicle ownership is a lifestyle choice, not just a means of transport. With growing affluence, the demand for cars in this segment will continue to rise.

Statistics show that while the car population during the period 1997 to 2004 rose by 10 per cent, the number of car trips increased by 23 per cent. To achieve the target of increasing transport modal share especially during the morning peak period to 70 per cent from the current 63 cent, we expect usage charges such as ERP to eventually increase. But it is unlikely to hit astronomically high levels if efforts to improve the public transport system pay off.

As the ERP is not intended to be a revenue-generating device, there should be a balance in the overall charges. We expect upfront taxes to decrease in tandem with increases in ERP charges.

The Eurokars Group represents brands in the premium luxury segment. Buyers in this segment are more affluent and less affected by increases in usage charges.

Mark Choong,
managing director of Borneo Motors Singapore, which distributes Toyota and Lexus

Improving the public transport network and having a comprehensive system will no doubt cause certain car owners to rethink and review the necessity of owning a car, especially in view of the high cost of vehicle ownership. This may reduce car sales to some extent, in particular, the marginal owners. However, car sales are very much driven by 'aspirational wants' and 'practical convenience' and therefore will continue for the foreseeable future.

It is generally expected that petrol taxes, ERP and parking charges will increase in the days ahead. However, any increase is also expected to be gradual and moderated in view of political consideration and the demand and supply of parking facilities.

And it is widely expected that if usage charges go up, then ownership charges like ARF should come down, albeit gradually. The government has mentioned that before. If usage charges increase significantly and ownership charges like ARF are reduced proportionately, then in general it will benefit higher-end cars more as demand in this segment tends to be less elastic. Therefore Lexus and Toyota should stand to benefit from it.

Barry Kan,
general manager of Malayan Motors, which represents Bentley and Jaguar

As far as the aspirations of Singaporeans are concerned, there will still be some who will take the public transport and there are some who want to enjoy the privacy and convenience of owning a car.

If you look at the vehicle ownership statistics, about one in 10 Singaporeans owns a car (there are about 460,000 cars for a population of 4.5 million people). I don't think this figure is high compared with, say, the US where there is roughly one car for every two people. So car sales won't be affected because at any one time, there will always be 10 per cent of Singaporeans who want to buy a car.

As for ERP charges, everything is relative, not just charges for vehicles. An increase is inevitable as the economy expands and as Singapore aspires to be a developed nation.

The mindset will change. In the old days, most people were worried about road taxes and the COE premium. A two-litre car used to be considered a luxury model. But now, the line between 1.6 and two litres is blurring, which goes to show that people are aspiring to better things in life.

Another good example is the number of cars with automatic transmission - 85 per cent were manual about 20 years ago; 90 per cent had no aircon; and 2 per cent came with leather seats while the rest had natural factory trim. Today, more than 70 per cent of sales are auto, 100 per cent have aircon, and more than 50 per cent have leather. So what does that tell you? If these items are not luxury, then what constitutes a luxury item? So the luxury benchmarks have moved. Usage charges will soon become part of the luxury of owning a car.

Kevin Kwee,
executive director of Group Exklusiv, which represents Geely, Skoda and Volkswagen

Car sales will not be affected because car ownership and the convenience it brings is more important. There is a premium to be paid for car ownership but I predict that the trend will be towards Off-Peak Cars (OPCs) because of rising usage charges like ERP and parking, as well as higher petrol prices. If you track OPC numbers, they are growing and for our kind of product (the China-made Geely), that makes it more interesting.

Most of our customers are budget customers. They are prudent about their spending, so they buy an OPC for use during off-peak hours because during office hours, they are working. If they drive to work, they have to pay for ERP, petrol and carpark charges. And if public transport remains cost-efficient during working hours, that's perfect because they can take the MRT. Why drive when the train is faster?

But after work, when they do their grocery shopping or go out for a midnight snack, they will drive. So the OPC trend may increase if ERP charges are raised.

Harold Koh,
managing director of General Motors Overseas Distribution Corporation, for Chevrolet

I think car sales will only be marginally affected as Singaporeans will still aspire to own cars. If the off-peak car policy is still in existence, we expect that the demand for OPCs (Off-Peak Cars) will go up.

It is unlikely that the government will increase petrol taxes. However, we expect the government will increase the road usage tax over time and more roads will be affected with more gantries being set up.

When that happens, ARF or the additional registration fee, is likely to be reduced over time. The government's policy is to make cars 'relatively affordable' and to tax car usage. But if usage charges are raised significantly, that will affect the whole market rather than specific brands. If usage charges increase significantly with the appropriate ARF cuts, it may not affect car sales.

If it does affect sales, the COE price will decline to such a level that it becomes attractive for buyers again. In this supply-controlled environment, the COE will act as the equaliser. After all, the quantity of cars in the market is fixed.

Glenn Tan,
chief executive of Motor Image Enterprises, which distributes Subaru in the region

Public transport will reduce congestion in the busy traffic areas, whereas going about for other activities such as shopping or to transport the children, etc, will still require a car. So making public transport a choice mode would not directly affect car sales.

I believe that parking charges will change according to the supply and demand. However, for the ERP, I believe that ERP will change as the usage of roads changes.

With the government's goal of moving away from the high cost of ownership towards usage-based costs, I would think that ARF would be reviewed. And if usage charges are increased significantly, our models such as the R1 and R2, which can travel 24 km on one litre of petrol, will experience higher demand as people look to better fuel economy. Also, our Tribeca SUV, which is a seven-seater, where more people can fit into a car to be more cost effective.