COE prices fall across the board following increased supply; premium for big cars plunges by $40k
SINGAPORE – Certificate of entitlement (COE) prices fell across all five categories at the latest tender exercise that closed on Wednesday.
The biggest drops were in the premiums for Category B, for larger, more powerful cars and electric vehicles (EVs), which tumbled by $40,000, and the Open category, which fell by nearly $33,000. These drops came after six consecutive tender exercises that saw record-breaking premiums for both categories.
The premium for Category B COEs ended at $110,001 – down 26.67 per cent from the $150,001 record set in the previous round three weeks ago. This is the biggest fall in COE premiums since 1995.
At $125,011, the latest COE price for the Open category – which can be used for any vehicle type except motorcycles but ends up mostly for bigger cars – is 20.88 per cent below the $158,004 record set at the last tender.
The COE premium for Category A, for smaller, less powerful cars and EVs, fell to $95,689 – a 9.73 per cent drop from the $106,000 recorded at the last tender exercise.
This is the first time the COE price in this category fell below the six-figure mark since August.
The commercial vehicle COE premium dipped by 8.01 per cent to end at $78,001, from $84,790 at the last exercise.
The motorcycle COE premium came in at $10,889, down 2.79 per cent from $11,201.
This is the first tender exercise under the new quota period from November to January with a bigger COE supply.
Compared with the last tender in October, there were 636 COEs for larger cars in the latest exercise – an increase of 34.75 per cent. There were 924 COEs for smaller cars, 15.93 per cent above what was available in October. These figures include certificates that were not allocated earlier and expired COEs that were returned for bidding.
Since the second tender exercise in May, the Land Transport Authority (LTA) has taken steps to increase the supply of COEs, with a redistribution over several quarters of around 6,000 car COEs due to expire in the next projected supply peak. This means LTA is effectively borrowing from future COE quota to bump up supply.
Three hundred COEs for smaller cars were reallocated for October.
Between November and January, an extra 1,614 COEs have been injected across the car and commercial vehicle categories, on top of the 1,895 COEs for cars that were previously reallocated for the next three months.
This means the COE supply for cars will be 35 per cent higher than what was available in the last three months, while the quota for commercial vehicles will be 65 per cent more than in the preceding quarter.
Speaking in Parliament on Monday, Acting Transport Minister Chee Hong Tat said the Government will bring forward more COEs that are guaranteed to expire in the future to tackle the current supply trough. The authorities, he added, will ensure that the supply of certificates in the upcoming quarters will continue increasing in 2024 until 2026 and 2027, when supply is expected to peak.
Mr Nicholas Wong, general manager of Honda agent Kah Motor, said: “It took three doses of ‘medicine’ to finally keep the COE price in check.”
Still, motor dealers told The Straits Times that while the correction in COE premiums was largely expected with the higher COE supply, the extent of the drop took them by surprise.
“It’s really out of the blue,” said Mr Ng Choon Wee, commercial director of Komoco Motors.
The prices of new cars, the dealers added, are expected to come down before the weekend to reflect the lower COE premiums and draw more crowds to showrooms.
New cars are typically priced to include a COE.
Mr Ng estimates that prices of smaller cars would be lowered by around $5,000, while those for larger cars may plummet by between $20,000 and $25,000, short of the full extent of the drop in COE premiums.
The lower prices would likely boost sales and this, in turn, will raise demand for COEs in future tender exercises. Dealers want to build in some buffer and thus be able to place higher bids to secure COEs and deliver new cars.
Other dealers noted that much will hinge on how sales pan out in the next two weeks. The next COE tender closes on Nov 22.
Wednesday’s COE tender results are also expected to have an impact on used-car dealers. An industry insider said the stock of used cars bought earlier would now be worth less. This is because used-car values are pegged to COE price developments.
Mr Neo Nam Heng, chairman of diversified motor group Prime, hopes that the Government’s projection for more COEs will come through. “Then we can see COE prices on a (sustained) downward trend,” he said.
Cue. (n.d.-e). COE prices fall across the board following increased supply; premium for big cars plunges by $40k. The Straits Times. https://www.straitstimes.com/singapore/transport/coe-premiums-fall-across-the-board-following-increased-supply-with-steepest-drop-for-big-cars