Young Singaporeans still aspire to own a car

Young people's aspiration to own a car in Singapore may have grown stronger over the years.

Why do people in Singapore want to own cars despite the monumental cost of motoring here? While that may seem like a silly question, it is one that needs to be asked.

But before we answer that, do we know for sure that people here want to own cars? Or is it a pursuit of only the rich and famous?

A recent survey commissioned by The Sunday Times and carried out by Nexus Link found that nearly two-thirds of young people (18 to 35 years of age) aspire to own a car, with most wanting a set of wheels within the next five years.

The door-to-door poll of 501 citizens and permanent residents who do not yet own a car was the first survey of its kind in Singapore.

You would think that that desire has diminished over the years, what with the tightening of COE supply (annual allowable growth rate plummeting from 3% to 0.25%), and the tens of billions spent to beef up the public transport network here.

Not quite, if we take the COE bid-to-quota ratio as a proxy for car demand. In 2006, the average ratio for Category A (the mass market category) was 1.34. But in 2016, it is 1.54 – a 15% increase. Figures for all tenders between January and October 2016 (latest available at time of writing) were tallied.

Uber and gang might have skewed demand. Sure, but at the same time, taxi bids are no longer at play in 2016, while they were back in 2006. So, these two factors probably square off (we do not know for sure, because bids by private-hire parties are no longer transparent).

So, car demand is still revving high despite more than four decades of vehicle population control. But why?

Experts believe it is only natural for car demand to rise with affluence. Academics like Joyce Dargay and Dermot Gately (1997) have done extensive global studies on the effects that income have on car ownership.

SIM University economist Walter Theseira says there has been a theory that millennials are much less likely to want to own cars because they are more likely to be living in dense cities and also more averse to taking on debts.

“However, that theory is being challenged with new evidence suggesting that car ownership is now on the rise among millennials in the US,” says Dr Theseira.

Respondents to The Sunday Times survey cited several reasons for wanting to own a car, such as convenience, freedom and catering to the needs of a family with young children or ageing parents. Some cite comfort and privacy of a car, as opposed to taking the train or bus during peak periods. In short, obvious reasons.

Nanyang Business School adjunct associate professor Zafar Momin warns that Singapore would not be able to cater to such aspirations.

“The privately owned car population could increase by 35 to 50 percent, even if a quarter to a third of the young people who aspire to own a car ultimately purchase one,” he says.

“It would be difficult for the Government to maintain free-flowing traffic with such dramatic increases in the car population. Fulfilling their aspirations may come at a very high cost.”

The professor, however, reckons ERP 2.0 – which will be launched by 2020 and which can charge motorists not only for where and when they drive, but also for the distance they clock – could allow more Singaporeans to own cars.

This is because the new-generation electronic road pricing system would be far more effective in controlling usage, the real cause of congestion.

“That is one lever for relaxing car population,” Prof Momin says. “With ERP 2.0, the 10-year age limit on cars would need to go as you are trying to get people to use the car only when it is really necessary, and at a steep pay-per-use.”

Dr Theseira says more research needs to be done on car aspirations. “I would like to know, out of those who want a car, how many of them want the car largely for the private mobility it provides, versus how many want the car for the social status benefits, in addition to private mobility?”

The cohort who wants a car for mobility can be satisfied with public and for-hire private transport “if access improves sufficiently”, he says. But those who want the social status cannot be satisfied “unless car ownership as a symbol of success becomes less important to Singaporeans”.

“That will take much more time, because our society still places quite a lot of emphasis on outward signs of success such as the kind of housing one lives in, or the type of car one drives,” Dr Theseira adds.

“It is telling, after all, how demand for high-end cars is robust in Singapore despite the tax structure which makes them much more expensive than mass-market cars,” he observes.

Separately, Singapore is not unique in imposing high taxes on cars and driving. Chinese cities such as Beijing, Shanghai and Guangzhou have introduced vehicle quota systems like ours, and it will be a matter of time when car prices there reach, or even surpass, those here.

Norway is another country that imposes hefty taxes on cars and petrol (despite the country being one of the largest oil producers in the world). Nevertheless, cars account for more than half of all trips in the Scandinavian country. Not much different from Singapore, then.

The COE is not the biggest cost component in new car ownership.