- Published: Wednesday, 20 January 2016 21:49
It’s not often you see Category A COE prices overtake those of Category B. Then again, it’s not often there’s a Singapore Motorshow going on...
SINGAPORE — Stranger things have happened, but not very often. Days after the Singapore Motorshow closed its doors for 2016, the market for COEs (Certificates Of Entitlement) did its thing, and the aftermath was surprising.
The Category A* COE saw its price jump from $45,002 to $51,301, buoyed by healthy order figures. 3,437 people tried to get their hands on one, compared to 2,013 a fortnight earlier.
But what will have raised eyebrows the most is the fact that, in the rush for Category A COEs, people seemed to forget all about Category B**. Accordingly, its price fell to $50,089, from $54,920 in early January.
The price for a Category E*** COE took a similar tumble, from $55,089 to $51,000.
The buyer of the humblest car will have paid more for his COE this week than the proud owner of a new Ferrari
It created a situation that nearly never happens: the Category A COE (which the Land Transport Authority has tried strenuously to keep cheaper than the Category B one) has become the most expensive in the land.
Put another way, the buyer of the humblest car will have paid more for his COE this week than the proud owner of say, a new Ferrari.
For that, you can spread some blame around. 2016 had kicked off with a $9,299 drop in Category A’s price, which set the scene for a buying frenzy. Showrooms had already become crowded a week before the show itself opened. “If you drove around Leng Kee, you could see it for yourself,” says Wolfgang Huppenbauer, the president and chief executive of Daimler Southeast Asia, the importer of Mercedes-Benz vehicles here.
Then came the show itself, with its strong focus on mass-market, mainstream car buyers (ours is a motorshow with no exotic cars but plenty of practical ones, remember), and any number of significant new models on offer from Category A: the Mitsubishi Lancer EX, the Suzuki Ciaz RS, the Mazda 2 Sedan (pictured below) and the new Nissan Pulsar, to say nothing of the BMW 216d Gran Tourer and its seven seats.
“I think, in the two weeks including the (motor) show, we did maybe one month’s worth of sales. Maybe one-and-a-half months, in fact,” says a senior operations manager from a multi-brand franchise. “But nothing moved in Cat B.”
To be fair, the Motorshow saw its share of car launches in the Category B end of the market, as well. The new Toyota RAV4, the Lexus IS 200t, the Honda Legend and the enormous Infiniti QX80 were just some of the interesting ones that made their debut there.
Yet, with cars in general becoming more affordable than they have been in years, it was the turn of mass-market stuff in Category A to roll under the spotlight.
But as this week’s COE results suggest, will their cheapness cancel out their cheapness?
Short-term yes, long-term no.
FIRST PROPERTY, THEN SHARES, THEN… COES?
Famed American investor Jim Rogers has a saying: the cure for high prices is always high prices. The billionaire may have been talking about commodities, but the same applies to some extent to COEs.
This week’s Category A results will lift car prices and put off some car buyers. Last week more than 10 new cars could be bought for less than $90,000, but after today there will be hardly any, and if nothing else, shoppers are likely to wait and see what happens.
That won’t prompt a collapse in prices, mind you. Category A’s order books are likely to take some time to fulfill, so over the next few months dealers will have to keep bidding for COEs to register cars sold before and during the Motorshow.
Some expect this leftover demand to stay strong till March or so.
But beyond that, the rest of 2016 holds good news for car buyers: we might see $40,000 to $45,000 as the new normal for COE prices. That’s the view of one chief executive for a three-brand dealership we spoke to on condition of anonymity.
His thinking is that, whatever the demand situation, the COE supply will grow this year.
Poor sentiment about the economy and a bearish outlook for the stock and property markets point to soft COE prices in 2016...
The number of COEs is mainly determined by how many cars are de-registered; when one car leaves the road, it creates room for a fresh COE so that a new one can take its place.
And according to figures from the Land Transport Authority, this year more than 100,000 cars will turn 10 years old. That’s when their owners must decide whether to renew their COEs or send their cars off to the grim deregistration reaper.
The vast majority tend to choose deregistration, so a fat COE supply in 2016 should be the result. How fat? “The COE release for passenger cars is expected to be about 85,000 to 95,000, compared to about 55,000 to 58,000 in 2015,” says the CEO we spoke to.
Indeed, the COE harvest is already looking plentiful. Come February, there will be 4,057 certificates a month for Category A car buyers, up from 3,313. Category B’s supply gets bumped up to 2,417 (from 2,049) and Category E sees its supply grow to 892 (from 720).
Throw in a generally poor sentiment about the economy this year, along with a bearish outlook for the stock and property markets, and soft prices seem a given in 2016.
Just how soft? Both the ST Index for shares and the URA’s Property Price Index are down to 2011 levels. They say things come in threes, don’t they?
* for cars with engines up to 1.6 litres in size and less than 130bhp in output
** for cars with engines bigger than 1.6 litres or more powerful than 130bhp
*** for any kind of motorised vehicle, but almost certainly used only for cars