- Published: Friday, 07 February 2014 00:00
Singapore - Within the motor trade, all eyes were on February’s first auction for COEs (or Certificates Of Entitlement), which ended on Wednesday.
This round of bids was different, in that it was the first to take place after the Land Transport Authority’s new method of slicing up the COE pie took effect.
Instead of corresponding to cars with engines smaller or larger than 1.6 litres respectively, Category A and B certificates are now for cars up to 1.6 litres and 130bhp, and cars above 1.6 litres or 130bhp.
The point of all this was to establish some sort of social equity to the COE game, which is by design, a contest won by depth of pocket.
With Category A (as it used to be defined) becoming increasingly crowded with cars from such luxury brands as Audi, BMW and Mercedes-Benz, the decision was taken to banish such cars to Category B, using their small but relatively powerful engines as the excuse to do so.
This, the thinking went, would leave Category A to more mainstream buyers, the sorts of folk who want a Toyota Corolla Altis or a Hyundai Elantra to get around, and not to show off. As for the people coveting a BMW 316i or Mercedes C 180 CGI? Let them play with the big boys in Category B. Too bad if they can’t afford to do so.
By and large, it looks as if the object of the exercise was to soften Cat A prices, and damn the consequences for Category B.
So what happened? The Cat A certificate did indeed see a drop in price, but only by a paltry $726 to a still-pricey $71,564. Hardly the stuff to have Toyota salesman doing cartwheels in the showroom.
As for Category B, the certificate also came down in price but by the more meaningful sum of $3,700, ending the auction at $75,300.
The Open Category (or Category E) COE, which can be used to register anything that can be registered here, also saw its price fall $1,807 to $77,003.
To recap, Cat A was meant to get cheaper while Categories B and E were expected to get more expensive. So far, that’s zero out of three.
Yet, the results from February’s first COE auction probably don’t paint the true picture of what will happen to prices in general, after the COE re-categorisation. “This COE result? Forget it,” said the CEO of an importer for one luxury German brand, one week before the auction. “It’s Chinese New Year. Everyone is out of the country, and showrooms are closed.”
Indeed, the Lunar New Year period is the one occasion in the year during which the car trade permits itself a lengthy break, and showrooms were typically closed for four days over the holidays. No showrooms, no car sales, no bids for COEs.
“And anyway, with this new COE classification everyone wants to wait and see,” continued the CEO we spoke to. “I give it two months before we see the real picture.”
Seems reasonable to us. Showroom closures and buyers’ preference to keep an eye on the market could well have dampened COE prices this time around.
But if that much was true, then the obvious bad news is that the lower prices aren’t set to last. Once car buyers shake off their holiday mood and wander back into showrooms, Category B and E COEs are likely to get a boost.
As for Category A, now that that corner of the market has been newly expunged of luxury models, we should see prices make some sort of climbdown, shouldn’t we?
Sneaking back into Category A
Perhaps not. Car dealers have had plenty of time to plan for the ‘new’ Category A, and their pricelists are now padded with models that sneak beneath the 130bhp threshold.
Assuming you think of Japanese and Korean machinery as being generally mainstream, and view European cars as posh, then consider the fact that more than 30 models from the Continent are still in Cat A: Audi has at least four, Citroen seven, Mercedes three, Renault a couple and Volvo, four. Volkswagen has a whopping 13 models in its Category A lineup.
Volvo and Mercedes buyers, in other words, are still in direct competition with Suzuki and Toyota buyers for Cat A COEs.
That being so, it’s difficult to imagine Category A prices coming down, at least for the reasons brought about by the re-categorisation of COEs. The long-term picture of COE prices may not be clear yet, but compared to what we’ve seen in the recent past, it’s not looking very different at all.