SINGAPORE: Vehicle distributors have welcomed the revision to the special tax on Euro-IV diesel cars announced in the Singapore Budget speech, saying that the change makes it cheaper to own diesel cars and will open up a new market for car makers.

Presently, drivers of diesel cars pay a special tax on top of the road tax. From July, the special tax will be revised from the current four times the road tax to an absolute-dollar tax based on the engine capacity of the car, at a rate of $1.25 per cubic centimetres (cc) of engine capacity, subject to a minimum tax of $1,250.

With the revision, car owners will save between 32% and 56% on the special tax, depending on the engine capacity of the car.

This is good news for motorists like Mohammed Fairuz. He has just bought a new car but he said he would consider switching to a Euro-IV diesel-powered one in the future.

"If it's environmentally friendly....if it gives you the same performance at a cheaper rate, why not?" he said.

Dealers say diesel-powered cars, which are popular in Europe, offer a smoother ride. But some motorists have their reservations.

"There is of course a psychological barrier to diesel for most of us private consumers. We would look for petrol-driven cars first. To switch to diesel, we must be very convinced by test drives," said motorist Stanley Gan.

Honda may roll out diesel variants of its existing models in Singapore in 2010, at the earliest.

Kah Motors, which distributes Honda cars, says it is working with the research departments in Japan and Thailand to tap this new market.

Dealers say a Euro IV-compliant diesel car will cost 10 to 15 percent more than petrol-driven ones.

This, along with the additional taxes, can only be offset if the annual mileage crosses 25,000 kilometres.

"If you look at a litre of diesel and a litre of petrol, you already save 50 cents. Each litre of petrol compared to a litre of diesel, it actually gives you less fuel economy. So if you use diesel, you could gain up to 30 to 40 percent of extra mileage, so the more you drive, the more it makes sense," said Vincent Ng, product manager at Kah Motors.

The Motor Traders Association said Singaporeans will need time to get used to the concept of a diesel-powered car.

Its take-up rate will depend on how government policy is shaped.

The association added that a contention with diesel cars is that they contribute to pollution.

Environmentalists Channel NewsAsia spoke to, said currently Euro-IV diesel cars still emit a strain of pollutant.

But they expect the new Euro-V diesel vehicles to be as clean as petrol-powered ones and will also be more fuel efficient.

The new Euro V-compliant engines will be available in Europe next year. - CNA/ir

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