THE results of the bidding for Certificates of Entitlement (COE) in May’s second round were mixed, but stable. No category saw an increase of more than 3 per cent, although the category for large cars rose again, edging towards S$106,000.
The premium for Category A fell 1 per cent, or S$904, to S$92,700.
The Category A COE applies to mainstream cars with engines of up to 1,600 cubic centimetres (cc) in capacity, or with up to 97 kilowatts (kW) of power. It also applies to electric vehicles (EVs) with up to 110 kW of power.
The premium for Category B rose just 0.7 per cent, or S$687, to S$105,689.
Category B is for larger, more powerful cars with engines of more than 1,600 cc in capacity, or that have more than 97 kW, or for EVs with more than 110 kW.
While the increase was small, it marks Category B’s fifth consecutive price increase since March’s first round of bidding, when it was S$96,010. The Category’s premium has remained above the S$100,000 level since April.
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Category E rose by 0.3 per cent, or S$313 to S$105,002.
Category E is the open category, and can be used to register any vehicle aside from motorcycles. However, it is typically used to register large cars of Category B, usually the most-expensive COE category, so its price shadows that of Category B.
The certificate for commercial or goods vehicles, Category C, posted the largest change in this round of bidding. It went up by 2.9 per cent, or S$2,000, to S$72,001.
The premium for Category D, applicable to motorcycles, fell by 2 per cent or S$192, to S$9,311.
Stability on a slow market
Industry observers The Business Times spoke to said that stable premiums in this round indicate that price pressure has eased as dealers clear backlogs and that the new car market remains slow as a result of high COE prices.
As reported by BT in April, the two major car shows of the year – The Singapore Motorshow in January and The Car Expo in April – typically generate a large number of orders due to attractive promotions.
COE prices tend to remain elevated in the rounds following, as dealers clear orders by obtaining COEs and registering cars.
Sabrina Sng, managing director for Lotus, Polestar and Insurance at dealership group Wearnes Automotive, said: “Given that the Motorshow is long over and The Car Expo happened a couple rounds ago, the results of this round’s bidding suggest that most of the dealer backlogs are now cleared and we are seeing that the market is slow.”
She noted that the number of bids for the two passenger car categories has fallen – Category A by 11.5 per cent and Category B by 11.2 per cent – indicating weaker demand for COEs.
Nicholas Wong, the chief executive officer for authorised Honda dealer Kah Motor, also noted the drop in bids received, adding that between April’s second round and May’s first round there was a three-week break.
This typically increases the number of bids received, as dealers have more time to collect orders, and bid accordingly.
“Generally, the buying sentiment is still weak and there have been no big surges in demand. I think many buyers are hoping for premiums to dip to January’s levels,” he said, referring to when Category A and B premiums were at their lowest level for 2024.
Calls for increased COE supply
“But that will not happen soon, as the current method of ‘returning’ COEs to the pool is too slow, as it now uses the average of the past 12 months’ deregistrations,” said Wong.
Because no growth is allowed for in the passenger car categories, the COE quota is determined largely by deregistrations.
A new quota is announced every three months, with the most recent quota announcement being for May to July.
Since February 2023, the rolling average of the number of vehicles deregistered over the previous four quarters has been used to determine the COE quota, up from two quarters in July 2022.
Before that, the quota was computed by the number of deregistrations in the preceding quarter alone.
Industry figures also called for more COEs to combat rising Category C prices, which have steadily increased since April’s first round of bidding from S$67,501.
Ron Lim, the head of sales and marketing for Nissan authorised distributor Tan Chong Motor Sales, said: “I think businesses are now biting the bullet after holding back too long and hoping for COE prices to come down.”
He added that Nissan had seen increased demand in sales for new commercial vehicles, as well as demand for replacements of existing ones.
The sales manager of a commercial vehicle brand told BT that demand has been spurred by commercial vehicle leasing companies renewing COEs to meet the requirements for new contracts.
“I hope that more COEs can be released to ‘tame’ the premiums in the next quota period,” said Tan Chong’s Lim, who added that reducing the need for Category C to contribute to the Category E quota would be a good starting point.
Currently, Categories A, B and C contribute 10 per cent of their deregistrations to Category E.
“The (Category E) rule makes no sense, since Category E is never used for commercial vehicles. Ultimately, higher premiums are not healthy as this will increase operating costs for companies, which will be passed on to consumers,” he said.
