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ERP 2.0: Should It Replace the Existing COE System?

ERP 2.0: Should It Replace the Existing COE System?

So, it’s official. The satellite-based ERP 2.0 system will become reality come 2020, for a price of $556 million dollars. To add salt to the wound, it will be built by the consortium of NCS and Mitsubishi Heavy Industries Engine System Asia.

Just in case you didn’t know, those are the same people who designed and maintained our current ERP gantries, so you know it’ll never break down, especially not when you want them to.

How does ERP 2.0 work?

In a nutshell, here’s what this new system could spell for Singaporean motorist.

  • Global Navigation Satellite System (GNSS) units will replace the current IU units, which allow your car to be tracked while driving in the country.

  • The possible removal of existing ERP gantries as they are increasing costly to maintain and “visually intrusive”.

  • Motorists would then be charged on a distance-based pricing model, which tracks how much you drive within the defined “congested roads” and you only pay for the distance you travel.

  • Potential implementation of coupon-less parking as the GNSS unit can track and charge you for the duration parked, without the need for paper coupons.

  • A possible new pricing system for Off Peak Cars where instead of having to pay a blanket fee for “on peak” time usage, motorist again only need to pay for what they use in terms of time or distance traveled.

  • This new usage – based charging system could potentially allow the government to lower COE costs (or do away with it) and not use that as a means of car ownership control anymore.


The technology behind the ERP 2.0 is already being tested since 2018. Dedicated Short Range Communications (DSRC) beacons have been installed at various locations along expressways such as Ayer Rajah Expressway (AYE), Marina Coastal Expressway (MCE) and Central Expressway (CTE).

Images of the new onboard unit (OBU) has been circulating on the interwebs and it looks a little like a taxi meter. However, authorities say that that’s not the final design. The actual OBU will be rolled out progressively from 2020.

What is the purpose of implementing ERP 2.0?

Officially, this second-generation ERP system is supposed to continue the work of easing traffic congestion in Singapore.

The reason why we’re moving to this system is because the existing gantry system is getting more and more expensive to maintain.

Each gantry costs $1.5 million dollars, and we went from 27 gantries to 77 gantries in past two decades since it was implemented. Well, duh, perhaps the solution is to not implement so many, right?

But, like it or not, ERP fees do serve their purpose — direct traffic away from heavily congested roads and cause drivers to think twice about driving during peak hours.

ERP 2.0, if fully implemented, will take Singapore a leap forward towards becoming a Smart Nation. Parking coupons will be a thing of the past, and drivers can see real-time dissemination of traffic information.

While it is convenient, Singaporeans are also questioning if there are other agendas behind implementing ERP 2.0. Is it to collect big data to impose stricter laws on people who have higher car usage or to generate more revenue for the government?

For Singaporeans, should the ability to track distance travelled, and thus the ability to tax road usage, mean that COE will be completely eradicated, and we can now take the opportunity to reduce the ridiculous high cost of buying a car?

Does it make sense to use ERP 2.0 to tax car usage in general? What about road tax and petrol tax?

Right now, you pay to drive your car in the form of road tax, according to the age of the car and the engine capacity of the car. This is a flat rate that is renewed every six months or a year. It may seem like a pretty hefty amount at first, but when you think about it, it’s really only costing you $1 to $5 a day.

That’s cheap. And really doesn’t do much to ease congestion in Singapore, since everyone’s paying road tax regardless of how much they actually drive.

Petrol taxes on the other hand do little to ease congestion too, since it doesn’t matter when and where you drive – you’re going to be taxed for driving even if you’re not causing any congestion.

On the other hand, using ERP 2.0, the government could easily tax you for each time you drive your car. This will ideally make Singaporeans think twice about using a car unnecessarily, unless we’re willing to pay every time we put our foot on the accelerator.

From a big picture standpoint, ERP 2.0 would probably reduce car usage in the most efficient way.

We can already see a parallel in the story of Uber and Grab cars. In places where private hire cars are few, or when it is raining, surge prices will apply in real-time, incentivising drivers to go to those areas.

But Singaporeans would probably complain if this ended up making it more expensive to own a car. But what if the government helped to reduce the cost? Like, for example, getting rid of the COE system? That’s what one transport researcher Professor Lee Der-Horng suggested to The Straits Times.

Can getting rid of the COE help reduce the number of cars on the road?

Let’s first take a look at the consequences of removing the COE, once ERP 2.0 has been implemented. At first glance, it makes sense, when you think about it – car congestion is caused by people who drive cars on congested roads, not just by people who buy them. Why then, should Singaporean car owners be penalised if they’re not adding to the congestion in the country?

By removing the COE, all Singaporeans can then own a car, not just those who can afford it. If we use ERP 2.0 to heavily tax car usage, especially at peak periods, these should ideally result in people driving in Singapore only when they need to. This way, everyone can own the car that’s suited to their needs – a family of 5 doesn’t have to squeeze into a cramped sedan simply because they cannot afford a bigger vehicle.

At the same time, because of the high cost of driving a car thanks to ERP 2.0, the satellite-based system can reroute traffic away from congestion-prone areas by making it even more expensive to drive in certain expressways or major roads.

But if everyone buys a vehicle to leave it parked in a parking lot, that is another problem all together as well.

ERP 2.0 would probably be a good replacement for road taxes and petrol taxes, but we’re going to have to disagree with transport researcher Professor Lee that it should replace the COE.

At the end of the day, it seems the real solution to reducing car congestion is to make it difficult to buy a car in the first place. And to that extent, the COE seems like it’s here to stay.

That said, the government still needs to look into overhauling the current COE system, so that its purpose of reducing the volume of cars in Singapore doesn’t include the side effect of increasing the profit margins of car dealers and being a system that only really benefits the rich in Singapore.

COE aside, who will be affected by ERP 2.0 the most?

While the ERP 2.0 is already ruffling the feathers of many average Singaporeans, the real people who will be the most affected are those who rely on their cars for a living, especially those who are independent and not tied to a company such as private hire drivers and delivery drivers on platforms like Grab and Lalamove.

If the government were to support these gig drivers, they could potentially offer rebates just like how they gave drivers road tax rebates when ERP was introduced. But this remains to be seen.

What are your thoughts on the ERP 2.0 system? We want to hear from you.

Related articles

New ERP Rates For June 2019 – Plus, The Top 3 Most Expensive Gantries To Avoid!

Got Into a Car Accident in Singapore? A Step-by-Step Guide on What to Do

Singapore Car Prices – Breakdown of Car Costs & How to Save Money

Image credit: Jnzl’s Photos via Flickr

The post ERP 2.0: Should It Replace the Existing COE System? appeared first on the MoneySmart blog. helps you maximize your money. Like us on Facebook to keep up to date with our latest news and articles.

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