Fairness is the bedrock of Singapore’s public policy. It is enshrined in our Constitution and reiterated in our Pledge. Whenever inequity rears its ugly head, we usually stamp it out quickly. But inequity exists in the local motor sector. I turn the spotlight on two examples here.
The first has to do with the open market value (OMV) of cars. OMV determines how price-competitive a car is. The lower the OMV, the lower the car’s selling price can be. Consequently, it also influences the seller’s profit margin. A car with an unusually low OMV thus accords the seller a distinct advantage over another seller (or competitor) that does not.
Generally, OMV reflects the value of a car. Hence, the OMV of a luxury car should be higher than that of a mass-market car. But it is not always the case. For instance, both the Mercedes-Benz A200 and Opel Astra GTC have an OMV of around $24,000. In the first quarter of 2014, the lowest OMV of a BMW 5 Series was $48,000, while that of a Mercedes-Benz E-Class (the 5 Series’ equivalent) was $43,000. This $5,000 difference becomes $12,000 after taxes, making the Merc a lot more competitive in the showroom.
There are many other examples, but you will find that when a car manufacturer becomes its own importer, distributor or dealer, its entire range of OMVs head south. Why should this be? These arrangements have zero bearing on the value of cars. So, by allowing such OMV differences to exist, we are subjecting ourselves to ridicule. This inequity has, in fact, existed for several years now. Something should be done to address it.
Second on the list has to do with parallel-imported cars and imported used cars. These cars have much lower OMVs than equivalent cars brought in by authorised agents. Incidentally, most, if not all, parallel-imported cars have been registered in their countries of origin before arriving here. This is so that the importer can get their hands on documentation to prove that the cars have met various safety and environmental standards – requirements stipulated by the Land Transport Authority.
Cars imported by authorised agents are given such documentation by their principals (the manufacturers). But parallel importers do not have this avenue. Hence they are allowed “detours” to get the required documentation.
A related question here is, should imported used cars be accorded lower OMVs? On the surface, it might seem reasonable to grant them lower OMVs. After all, the value of a used car is usually lower than that of a new one. But surely the reduction in OMV must be in line with the age and mileage the vehicle has clocked. In many cases, used cars imported here have barely clocked 100km. And yet, they are accorded generous discounts on their OMVs. This has allowed importers of such cars to price their vehicles attractively, in spite of the $10,000 additional tax that imported used cars attract.
Torque understands that certain motor traders are now lobbying for the authorities to drop the $10,000 surcharge, which is an anti-dumping measure. Hopefully, the authorities do not yield. These traders already have a significant advantage, not only over authorised new car dealers, but also used car dealers who sell locally registered second-hand vehicles.
