More COEs for February to April quota

Bigger COE quota to pull down car prices
Buyers of small cars may gain most; larger quotas likely in months ahead
By Christopher Tan, Senior Transport Correspondent, The Straits Times, 15 Jan 2015

CAR buyers can look forward to lower prices in the coming months, on the back of a substantial increase in the certificate of entitlement (COE) quota.

According to figures released by the Land Transport Authority (LTA) yesterday, there will be 11,298 COEs available to car buyers in the February to April period - 23 per cent more than in the previous three months, and more than double the supply for the corresponding period last year.

The biggest beneficiaries will be those buying smaller cars, as the supply of Category A COEs (for cars up to 1,600cc and 130bhp) will be 41.3 per cent bigger than now.

Supply of Category B COEs (for cars above 1,600cc or 130bhp) will increase by nearly 27 per cent.

Dr Park Byung Joon, an urban transport management expert at SIM University, said the new quota should result in lower premiums for Category A "for sure", and "a little bit for Category B".

He envisaged Cat A premiums falling by more than 10 per cent.

Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, noted that the Category A quota is now "pretty close to the magical number" of 1,000 COEs per tender, which he said would result in a meaningful drop in prices. "It'll be interesting to see if a correction will set in," he said.

Mr Lim added that the enlarged supply is "timely" because the Singapore Motorshow starting today is likely to lead to higher car sales. "It should absorb the increase in demand," he said.

Including certificates of entitlement for commercial vehicles and motorcycles, the February to April quota will have 14,114 COEs. This is 18.3 per cent more than the previous three-month quota.

The new quota is the first with a reduced 0.25 per cent cap on annual vehicle population growth.

The cap has been lowered systematically in recent years - from 3 per cent to 1.5 per cent in 2009, then to 1 per cent in 2012, and 0.5 per cent in 2013 - as the Government addresses what it deems to be an unsustainable vehicle population growth rate.

If the growth rate had remained at 0.5 per cent, it would have bumped up the new quota by almost 5 percentage points.

The LTA said that the latest quota includes a smaller Open category, which is now made up of 10 per cent of COEs from each of the other four categories, instead of the previous 15 per cent.

This is to address a vehicle population growth pattern that has been skewed in favour of cars.

Even though the Open category was originally meant to be a "safety valve" to prevent overheated prices in the other categories, it quickly became the sole domain of cars, especially bigger models. This is because sellers of big cars had bigger profit margins and could outbid others.

Dr Park of SIM University pointed out that the February to April quota is just the start of more liberal quotas.

Like other industry watchers, he expects the next several quotas to be even bigger, with supply peaking some time next year.

Post by Land Transport Authority – We Keep Your World Moving.

Replacement COEs main contributor to quota: LTA

WE THANK Mr Ivan Goh for his letter ("Difference in COE quotas puzzling"; Dec 25), in which he inquired how the quota for Category A certificates of entitlement is derived.

The quota for each COE category is determined by two main factors - replacement COEs for vehicles that have been deregistered, and the additional quota allowed for under the prevailing annual vehicle growth rate. Replacement COEs are, by far, the larger contributor to the COE quota.

In this regard, the main reason for the larger monthly quota of Category A COEs in 2004 compared with last year is that almost 60,000 Category A cars were deregistered in 2004, compared with fewer than 20,000 last year.

Also, when taxis were taken out of the COE bidding process in August 2012, COEs were not removed from Category A.

Rather, COEs used for taxi fleet expansion from then on were drawn from the Category E quota. This meant that prospective Category A car buyers no longer had to compete with taxi companies for COEs.

Helen Lim (Ms)
Director, Media Relations
Land Transport Authority

ST Forum, 16 Jan 2015

Difference in COE quotas puzzling

IN 2012, the Land Transport Authority (LTA) removed taxis from the certificate of entitlement (COE) bidding process. I believe it lowered Category A quotas because of this.

Ten years ago, the average monthly quota for Cat A COEs was about 4,400. The current figure is about 1,400.

I am puzzled at the huge difference, which cannot be accounted for by the removal of taxi COEs and the move towards lower vehicle growth. I hope the LTA can explain how the Cat A quota is derived.

Ivan Goh
ST Forum, 25 Dec 2014