FOLLOWING cuts announced yesterday to road taxes and registration fees, car industry players expect buyers to be happier initially, although car prices may not necessarily fall in the long term.

"Buying a car now will probably save you some bucks compared to buying next year," said Motor Traders Association president Michael Wong, referring to shrinking COE supplies ahead, which would push premiums up.

But the 15-per-cent cut in road tax taking effect from July will cheer new buyers and existing car owners alike.

The road tax cut is meant to offset the addition of 16 ERP gantries coming up this year, bringing the total in operation to 71.

Those who drive more powerful "green" cars, like hybrid sedans, could enjoy savings of around 35 per cent on road taxes under the new plan.

Mr Mark Choong, managing director of Toyota distributor Borneo Motors, said this would make bigger hybrids more attractive.

"One of the main issues with these cars is the high road tax,'' he said. "Buyers feel they're being punished.''

Besides the road tax reduction, which will cost Government coffers $110 million a year, car buyers can look forward to a 10 percentage point cut on a car's Additional Registration Fee (ARF) - the main car tax.

That translates to a savings of $1,650 for a car like a Toyota Corolla and $5,000 for a luxurious Mercedes E-class.

But Automobile Association of Singapore president Bernard Tay said the registration fees could have been cut more.

He also said the decision to raise future ERP prices by at least $1 at a time - up from the current increment of 50 cents - was too aggressive.

"The reason the 50-cent increases were not effective was that there was no real alternative to driving.

"But with all the plans to improve public transport now, you may not need to go for $1 increases,'' he said.

While the ARF cut will help buyers save money up front, owners will get back less when they eventually scrap their cars. This is because the scrap rebate is based on the ARF.

While most motor traders welcome the tax cuts, they said a decision announced yesterday by Transport Minister Raymond Lim to limit the growth of the number of new cars on the road to 1.5 per cent annually could drive COE prices up. The old rate, in place since 1990, was 3 per cent.

Motor Traders Association's Mr Wong said the cut was "steep", and reckoned car COE premiums would eventually rise to the $30,000-$40,000 region - from around $14,000 now. Car dealers said this could have a profound effect on the popularity of certain makes.

Singapore Vehicle Traders Association president Neo Nam Heng said sales of high-end cars will be least affected, while a $5,000 increase in COE rates could wipe out "one third'' of entry-level models.

This trend emerged in the mid-1990s, when COE prices shot to as high as $110,000. Back then, Mercedes-Benz was a bestseller with an unprecedented market share of up to 14 per cent. It is now back to more earthy levels of 4-5 per cent.

The COE back then cost much more than the car itself, pricing many ordinary buyers out.