SINGAPORE — Nearly 300 cars with price tags of at least $1 million were registered in Singapore in 2023, marking a drop in registrations for two consecutive years after five years of growth.
The 296 units from six brands registered in 2023 were 15.4 per cent lower than the 350 units logged in 2022, and 17.8 per cent lower than the record 360 units registered in 2021.
The number includes cars registered by authorised distributors and parallel importers.
Motor dealers attributed the drop to the higher tax rate for cars announced in Budget 2023, economic uncertainty and buyers' concerns about being too conspicuous with high-value purchases amid a massive money laundering case that surfaced in 2023.
Many dealers believe registrations will not go up significantly in 2024.
Some motor dealers said the news of the anti-money laundering blitz in August 2023 has dampened customers' appetite for luxury cars.
At least 10 foreigners have been arrested?in Singapore's largest anti-money laundering operation, with assets seized worth more than $3 billion. These assets include 77 vehicles.
Dealers, who declined to be named because of the sensitivity of the matter, said some customers want to avoid the scrutiny that may come with such high-value purchases.
One dealer said: "It doesn't matter whether they are in so-called legitimate businesses or not.
"These people just want to play it safe and not get into any trouble."
Even so, it is the hefty tax hike announced in 2023 that dealers said made the biggest impact.
At Budget 2023, the vehicle tax rate at the highest tier was cranked up to 320 per cent, from 220 per cent. This applies to the part of a vehicle's basic cost exceeding $80,000.
The tax is imposed at the point of registration, and has a direct impact on the car price.
For instance, a buyer of a Ferrari Portofino M could pay up to $240,000 more in vehicle taxes with the change, The Straits Times reported in February 2023.
The previous tax rate of 220 per cent was rolled out in 2022, climbing from a maximum rate of 180 per cent of a car's basic cost above $50,000, which was introduced earlier to target higher-end cars.
These measures affect the priciest cars on the market.
For example, the basic cost of an Aston Martin DBX707 luxury sport utility vehicle (SUV) was $221,024 in December 2023.
In comparison, the average basic cost of a BMW 520i executive sedan was $55,779 in December 2023, and that of a mass-market model such as the Toyota Corolla Altis 1.6 Standard was $19,691, based on Land Transport Authority (LTA) data.
The tax hikes introduced over two consecutive years have pushed the price tags of some models past the million-dollar mark.
The Bentley Bentayga V8 was priced at about $920,000 in 2021. After the tax revision in 2023, the cost of the luxury SUV shot up more than 30 per cent to nearly $1.2 million.
In addition to the higher tax rate, the authorities also capped a car's scrap value at $60,000.
Before the revision, deregistering a Rolls-Royce Phantom before the end of its 10th year gave the owner a rebate of more than $510,000.
LTA data showed that in the months after the changes were announced at the Budget in February 2023, registration of high-end cars accelerated rapidly.
For the six brands - Aston Martin, Bentley, Ferrari, Lamborghini, McLaren and Rolls-Royce - registrations between March and May 2023 totalled 168 units, forming 56.8 per cent of the year's total.
In contrast, there were 60 registrations in January and February 2023.
In June, however, registrations tumbled to seven units.
Industry watchers said the surge in registrations would have come from cars registered with Open category certificates of entitlement (COEs) secured before the announcement.
Cars registered with these certificates were not subject to the higher tax and capped residual value.
That is because Open category COEs have a validity of three months, so buyers had until May to avoid the changes.
Open category certificates, which can be used to register any vehicle type except motorcycles but end up mostly for bigger cars, are also transferrable.
A Straits Times report in February 2023 found that they were being resold for as much as $100,000 above their value to buyers who wanted to avoid the higher vehicle taxes.
To use the COEs in time, some dealers resorted to bringing cars in by air rather than sea. This bumped up transport costs by up to $20,000 per car. McLaren Singapore, for example, brought in at least four units this way during that period in 2023.
A spokesman for Rolls-Royce Motor Cars Asia Pacific said the manufacturer "moved heaven and earth", including building cars for Singapore ahead of other markets, to speed up their delivery.
Between March and May 2023, there were 23 registrations from Rolls-Royce's official dealer, representing 60.5 per cent of the dealer's total registrations for the year.
Mr Vincent Tan, founder of Vincar, a multi-brand dealership and parallel importer, said prospective buyers "jammed on the brakes" from June owing to the steeper costs of luxury cars.
He said many parallel importers would have stopped bringing in new million-dollar cars since.
Mr Tan believes that in 2024, customers will be interested only in new models not available before the tax revision, because they would not have any basis on which to compare prices.
Ms Dawn Loo, general manager at Eurokars Supersports, which brings in McLaren cars, expects the market for million-dollar cars to be similar to 2023 levels until 2025.
She said any fresh demand would likely be for brand-new or limited-edition models, or, in other words, cars that customers feel are "must buys".
Weighing just as heavily on the minds of buyers, dealers said, are macroeconomic factors such as the impact of the Russia-Ukraine and Israel-Hamas wars, as well as the performance of the stock market.
One dealer said some customers are also deferring buys to keep more cash at hand.
A motor industry professional with more than 30 years of experience, including managing luxury car brands, recalled that it took about two years for the automotive market to recover after the vehicle tax structure was changed in 2013 to be tiered according to the value of a car, instead of a flat rate.
"By 2025, buyers will forget the pain, and things will be hunky-dory again," he said.