Category B COE premiums hit a new record high in the latest bidding exercise in September, but could this be indicative of a major shift in car usage in Singapore?

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SINGAPORE

The first Certificate of Entitlement (COE) bidding exercise for September 2022 made for some interesting reading, with Category B in particular hitting a new record high. In fact, premiums rose across the board, with the exception of Category A.

In Cat A, which is reserved for cars with internal combustion engine (ICE) that are less than 1.6-litres in capacity and output of less than 130hp, and electric cars with an output of less than 147hp, prices went down by S$1,889 to end at S$86,000.

Category B, which is for ICE cars with engines that make more than 130hp, or are above 1.6-litres in capacity, and electric cars with outputs of more than 147hp, saw prices go up by S$999 to end at a record-breaking S$113,000.

Category E meanwhile, which is open to all vehicles except motorbikes, but usually ends up being used for big cars, saw a rise of S$1,289 to end at S$113,299, just short of the record S$114,001 recorded back in July.

The rise in prices can probably be attributed to the usual factors, such as a smaller quota and the three-week period from the previous bidding, which gave dealers more time to collect orders and place their bids in. But the disparity between Cat A and Cat B and E is also indicative of a larger factor at play.

In some sense, Cat A is seemingly a ‘true’ reflection of sentiment on the ground, with prices fluctuating accordingly based on consumer demand. However, Categories B and E, with a couple of exceptions, have been on a relentless upward surge since around May, and neither categories have dipped below the 100 grand mark since they first broke past that barrier in June.

It seems like we are in a sort of COE spiral, whereby high COE prices are driving away actual car buyers. Those who are in desperate need of a car but without the requisite liquidity to plonk down a hefty downpayment are now forced to seek alternatives, such as leasing or car sharing. And with demand for these services growing, providers are now expanding their fleet and further fuelling demand for COEs in the process.

You only have to take a look at the number of cars on the roads these days bearing the decals of car sharing companies like GetGo or Shariot, who are seemingly adding new cars to their fleet every other week. Tribecar, another car sharing company, even has brand new Tesla cars available as part of their leasing fleet, a staggering development that’s indicative of how large these companies have grown.

It’s not just car sharing firms that have been adding to the ‘unnatural’ demand for COEs these days. An industry source revealed that a certain car rental firm, working in collaboration with a ride hailing company, have registered a significant number of Cat B Japanese hybrid cars, which can be found parked at a carpark in central Singapore awaiting for hirers. While the private hire market may not be growing at the same pace as it was pre-pandemic, there are signs that things are starting to pick up once again as demand for these services start to recover in tandem with the easing of Covid restriction measures.

What does this all mean for you as a car buyer though? In the short and immediate term, it simply means that COE premiums are unlikely to dip any time soon. We can probably expect to see Cat B and E prices stay above the 100 grand mark at least well into 2023, before possibly easing off as the quota increases and gradually eases the pressure on premiums.

In the longer term though, if these fleet companies continue on their expansion exercise, then we might not see a huge drop in COE premiums even if a larger number of quota is released in the future. For the Government, this could very much be in line with their ‘car-lite’ vision, which aims to discourage private ownership and usage of cars in Singapore. It could very well be the case that if you need a car in the future, your first choice would be to reach for your smartphone to book for one via an app.

Where that sits with the traditional car buyer is really a question to ponder, but it isn’t beyond the realm of possibility that short of having a boatload of money, buying a car in Singapore is going to be extremely challenging for the everyman. The record-setting COE prices certainly bear that out today, but it could be something we all have to get used to, whether we like it or not.

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