Wednesday 18 September 2013

COE categorisation - LTA addresses concerns

WE REFER to the various articles on tweaking the certificate of entitlement (COE) system.

The intent behind refining the COE categorisation is to keep Category A primarily for mass-market cars.

We did not re-categorise COEs using open market value because OMVs can fluctuate with exchange rates and different car fittings. This could result in a particular car model fluctuating between Categories A and B, which would be confusing for car buyers.

There have also been instances when OMV was adjusted post-registration due to under-declaration, which could create consequential complications for COE categorisation.

While we understand the appeal of an OMV-based approach for COE categorisation, we have to carefully consider practical implementation concerns.

We felt that it was important to define the criteria for Category A cars in a simple, stable and consistent manner, and avoid creating confusion for car buyers and the industry.

Thus, we decided to continue categorising COEs using engine capacity, but with an additional criterion of engine power, with the result that the vast majority - more than 90 per cent of cars, based on last year's registration data - of the cars remaining in Category A will have an OMV of less than $20,000. This would largely achieve the social equity intent of our review.

Some have suggested re-categorisation by some measure of family-friendliness, or considering environmental objectives. It will be a challenge to try to accommodate even more criteria for a Category A car.

Some are concerned that re-categorisation by engine power could result in less efficient car models, or models being tuned down to qualify for Category A.

We assure the public that the Land Transport Authority (LTA) requires every new model to comply with internationally recognised technical, safety and environmental standards.

If the model has yet to be approved elsewhere, the LTA will require it to be tested by a reputable and accredited laboratory.

We will not approve models with an engine power specification that is lower than what was approved previously or declared in other markets.

Outside of the COE system, we have in place measures to address environmental concerns. In particular, the recently introduced Carbon Emissions-based Vehicle Scheme has seen a good take-up of lower-carbon-emissions cars, and we intend to review this next year to take into account technological advancements.

Ultimately, given the need to reduce reliance on cars, we assure Singaporeans that the Government will continue to invest heavily in public transport and improve taxi services.

Helen Lim (Ms)
Director, Media Relations

Why OMV not used for categorising cars

WE THANK Mr Desmond Teo Mingjie ("COE change goes against green drive") and Mr James Wong ("What makes a luxury car?") for their letters last Thursday, as well as senior transport correspondent Christopher Tan for his commentary on the same day ("Bring fairness back to the COE system"), on the refinements to the Certificate of Entitlement  (COE) system.

Many people suggested categorising cars according to their open market value (OMV). However, using OMV directly is problematic because a car's OMV can fluctuate significantly over a short period, depending on exchange rates and car model specifications.

Averaging the OMV will not solve the problem, as OMV can still change over time, albeit at a slower pace. For example, from January to August this year, the OMV of the Honda Civic 1.6L fluctuated between $15,911 and $21,736, and the OMV of the Volkswagen Beetle 1.2L fluctuated between $18,918 and $20,919.

A practical alternative is to use the known, verifiable characteristics of a car. From back-testing data on models sold here, we found that the combination of engine capacity and engine power would be a better proxy for OMV than engine capacity alone.

Using this criteria, more than 90 per cent of the 2012 cars that would remain in Category A, including family-friendly models, would have an OMV of less than $20,000, which was what most respondents preferred as the threshold for Category A.

Some suggested using carbon emissions or fuel efficiency. However, these are not good proxies and could end up penalising mass-market models. They are also already accounted for under the Carbon Emissions-based Vehicle Scheme, and we remain open to reviewing this scheme on a regular basis to ensure it meets the objective of reducing carbon emissions in our vehicle population, in support of our broader national plan to reduce our carbon footprint.

Ultimately, any option that is adopted would have some limitations, and we certainly do not rule out reviewing the COE system in the future to better address the various concerns and suggestions raised by the public.

Helen Lim (Ms)
Director, Media Relations
Land Transport Authority
ST Forum, 17 Sep 2013

Engine power 'better way to classify cars'
Lui Tuck Yew says it's more stable and easier to implement and police
By Royston Sim, The Straits Times, 21 Sep 2013

THE Government has defended the upcoming change to the certificate of entitlement (COE) system, saying the use of engine power to differentiate mass-market cars from luxury models allows for better rule enforcement and compliance.
The new COE rules, which will take effect next February, stipulate a capping of brake horsepower for Category A cars at 130bhp on top of the existing requirement that limits the engine capacity of these cars to 1,600cc.

Transport Minister Lui Tuck Yew said yesterday: "We have chosen something which I believe is more simple, more stable, easier and more straightforward to implement and to police."

Since the announcement on Monday last week, some have asked why open market value (OMV) or carbon emission was not used instead of engine power to differentiate luxury and mass-market cars.

Mr Lui said the authorities had considered "very carefully" the use of OMV as a parameter.

But he said the value is subject to fluctuations due to factors such as currency movements and cars of different origins.

"We wanted to avoid some of these oscillations between Cat A and Cat B, and some of these implementation issues where using OMV as a criterion could make it very confusing, very complicated," said the minister.

As for using carbon emission as a yardstick, Mr Lui said the authorities "deliberately decided not to conflate environment issues" with the goal of improving social equity within the COE system when deliberating on the change.

Mr Lui also commented on the latest COE bidding exercise that saw premiums rising by as much as 11 per cent, which analysts have attributed to the rule change.

The minister said such fluctuations were "expected" and that it will take several bidding cycles before prices stabilise.

He was speaking at his ministry's Family Charity Outreach event at S.E.A Aquarium, where he presented a $1 million cheque to Community Chest.

COE change goes against green drive

UNDER the change to the certificate of entitlement (COE) system that takes effect from next February, cars belonging to Category A must not have more than 130bhp of engine power ("COE system tweaked to factor in engine power"; Tuesday).

Many of the mass-market European makes will be shunted over to Category B.

The Land Transport Authority (LTA) has not been clear on the definitions of mass-market and luxury vehicles. Neither has the rationale behind the 130bhp limit been clearly explained.

The perception that European makes are not "mass market" needs to be changed. In Europe, cars like the Volkswagen Golf and Mercedes-Benz C180 are classified as mass market.

They already attract higher Additional Registration Fees here due to their higher open market values. Why are we dealing them a double whammy by placing them in the soon-to-be congested Category B?

Stringent European emission tests have forced carmakers to lower engine capacities and move towards forced induction. These innovations in turn make engines environmentally friendlier and more efficient.

Why are we punishing such innovations? There is no synergy with the Carbon Emissions-based Vehicle Scheme implemented earlier this year.

The LTA should walk the talk by making innovation one of its principal considerations in the COE change.

Cars with green vehicle rebates should be considered under Category A. Less efficient cars or those with bigger engine capacities should be classified under Category B.

The latest change is unlikely to lower COE prices as the supply is still low. Multi-generation families not only need to contend with high COE prices that are likely to stay for some time, but will also have to pay more for Category B COEs for their Volkswagen Tourans.

Desmond Teo Mingjie
ST Forum, 12 Sep 2013

What makes a luxury car?

THERE is no clear definition of what a luxury car is, and it is simplistic to use brake horsepower as a criterion ("COE system tweaked to factor in engine power"; Tuesday).

Luxury goods are usually priced higher. Therefore, a better way is to use open market value (OMV) to determine whether or not a car is a luxury model.

Carmakers who innovate and produce cars that can give more horsepower for the same engine capacity are being unduly "punished". These cars are more fuel-efficient, yet will be classified as "luxury" cars.

Also, the latest change is supposed to introduce a "measure of equity" into the certificate of entitlement (COE) system. Yet the COE for a 131bhp car will soon cost the same as that for a 600bhp Ferrari. How is this fair?

If the system has to be fine-tuned, it should be done across the board for all categories, and not just Category A.

A fairer system would be to categorise cars based on their OMVs, for example:
- Cat A: OMV below $25,000
- Cat B: OMV of $25,000 to $50,000
- Cat C: OMV of $50,001 to $100,000
- Cat D: OMV above $100,000
So, vehicles under Cat C and Cat D would be the real luxury cars, and their COE quotas should not exceed 10 per cent of the total number of COEs.

The super-rich can then compete against one another for COEs in these two categories, giving the rest who need a car a fairer chance to own one.

James Wong
ST Forum, 12 Sep 2013

COE tweaks 'penalise more efficient cars'
Dealers may bring in lower-tech cars with high carbon emission, say critics
By Royston Sim, The Straits Times, 17 Sep 2013

SEVERAL parties have come out in opposition to the Government's decision to use engine power as a criterion for the certificate of entitlement (COE) system, which they say punishes cars with more efficient engines.

In a Facebook post on Sunday, MP Hri Kumar Nair (Bishan-Toa Payoh GRC) said differentiating cars by engine capacities and power output is "meaningless" as this disadvantages more efficient cars.

He favours promoting cleaner, more energy efficient cars and suggested allocating more COEs to such cars and bringing down their prices to make them more affordable than less efficient ones.

The Land Transport Authority (LTA) announced last week that from next February, only cars with 130bhp or less fall into Category A. This criterion is on top of the existing criteria that limits Cat A cars to a maximum engine capacity of 1,600cc. This is to disqualify more powerful luxury cars, which are crowding out lower-priced mass market ones.

But setting limits on engine power discriminates against technology, said Mr Klaus Landhaeusser, regional head at leading automotive parts supplier Robert Bosch (South-east Asia).

As automotive technology advances, it is inevitable that engine power and torque increases while fuel consumption and emissions go down as a result, he said.

Models that will no longer qualify for Cat A include the Volkswagen Jetta 1.4 TSI, which has an engine capacity of 1,390cc and 158bhp and a lower emission.

One risk of using engine power is that dealers may bring in models from other markets that have older technology, higher emissions and lower power, he added.

He suggested using emissions to categorise vehicles, and allocating more COEs for cleaner cars, thus automatically favouring lower-emission, smaller cars, he said.

Asian Clean Fuels Association executive director Clarence Woo expressed concern that putting less-efficient cars on the road would affect carbon reduction and pollution control.

Singapore Environment Council executive director Jose Raymond noted that while the changes might ensure greater equity, "we should not be discouraging manufacturers which have found ways to make their engines cleaner and yet more powerful".

In response, the LTA said using fuel efficiency and carbon emissions could end up penalising mass-market models. It noted these factors are accounted for under the Carbon Emissions-based Vehicle Scheme (CEVS), which offers rebates for or taxes vehicles based on their emissions.

In his post, Mr Hri Kumar also slammed the changes as "an act of appeasement" to lower COE prices for Cat A cars. Government Parliamentary Committee for Transport member Lim Biow Chuan agreed the tweaks were not ideal. But he would prefer using open market value (OMV) to categorise cars instead of emissions.

He said: "The OMV of most luxury cars are way above $20,000. But the LTA looked at engine power instead. Will manufacturers decide to make less efficient cars?"

Market too small to influence carmakers
THE notion that the recently announced certificate of entitlement (COE) change would discourage manufacturers from producing more energy-efficient cars may be unfounded ("COE tweaks 'penalise more efficient cars'"; Tuesday).

Our local car market is too small, relative to those of most other countries, to influence manufacturers' decisions on further developing and making more efficient and powerful cars.

Ng Chee Kheon
ST Forum, 19 Sep 2013

Base COE categories on vehicle usage

THE recent flurry of letters on the change to the certificate of entitlement (COE) system seems to suggest that most people have forgotten the reason for having such a system - it is not meant to distribute cars in an equitable manner but to control congestion on our roads.

Any tweaks made to the system should always contribute to this end goal.

Thus, I am puzzled as to how factoring in engine power will reduce congestion.

In fact, a powerful engine increases the speed of the car, allowing the motorist to get to his destination faster, thus reducing congestion. If anything, there might be a case for lowering COE prices for cars with higher engine power.

Of course, this may be a moot point due to speed limits and safety considerations.

Instead of using engine power or any hardware specifications to categorise cars, we should be looking at uses for the car.

This is already done in Category C, for commercial vehicles, where COE prices should be capped since the vehicles contribute to economic growth.

I propose another three categories to replace Categories A, B and E.

First, an "unlimited use" category for people commuting to work in their cars. It would command the highest premium as these cars are the ones causing daily congestion on our roads.

Second, the "family use" category, akin to the previous weekend car scheme. Car owners would have to declare their mileage, which would determine their road tax. The tax could be a fixed amount or rate for a certain mileage, and rise steeply once it passes that mark.

Third, there may even be a "collector's" category for people who want multiple cars, where the mileage allowed is very low.

Chew Mun Kit
ST Forum, 19 Sep 2013

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