Singapore Budget 2026: PARF Rebate Cut Tilts the Scales Further Towards EVs

Singapore’s latest Budget introduces a significant shift in the financial incentives for vehicle owners, particularly affecting how early scrapping of cars is rewarded. By adjusting the Preferential Additional Registration Fee (PARF) rebate, the government is effectively encouraging longer vehicle ownership spans and making electric vehicles (EVs) a more economically viable choice.

The government has overhauled the PARF rebate by cutting it by 45 percentage points across the board and halving the maximum rebate from S$60,000 to S$30,000. These changes, which will take effect from the second Certificate of Entitlement (COE) bidding round in February 2026, alter the calculation of vehicle depreciation, impacting cars with higher Open Market Values (OMVs) the most.

Previously, a generous PARF rebate incentivised owners to deregister their vehicles early, thus contributing to a steady supply of COEs and keeping the market dynamic. With the rebate significantly reduced, it may become more financially sensible for owners to retain their cars for the full 10-year lifespan rather than scrapping them prematurely. This adjustment benefits lower-cost vehicles, particularly many Chinese EV models with competitive OMVs, making their total cost of ownership increasingly attractive compared to pricier internal combustion engine (ICE) cars.

This recalibration of the PARF rebate serves as a subtle but potent policy tool in Singapore’s broader push towards electrification. By compressing the financial incentives that previously favoured early deregistration of conventional vehicles, the government encourages consumers to reconsider the economics of vehicle ownership. EVs, with their lower depreciation risks and operating costs, stand to gain from this shift. Brands such as BYD and MG, which offer affordable EVs with relatively low OMVs, could experience stronger demand as their models become more cost-efficient.

However, the change may also influence behavioural patterns within the car market. With reduced incentive to scrap vehicles early, more owners might choose to renew their COEs and extend their vehicle usage. This could slow the turnover rate of cars, potentially affecting new car sales volumes and delaying the introduction of newer, cleaner vehicles in the short term. For commercial operators like ride-hailing and rental companies, higher depreciation costs could lead to increased prices passed on to consumers.

Ultimately, this policy adjustment tightens the financial framework around vehicle ownership while signalling Singapore’s accelerated commitment to an EV-dominant future. The coming years will reveal how the market adapts, but the trajectory towards greener, more sustainable transport is unmistakably clear.