COE premiums went up in most categories in the first bidding exercise for March, but the rise in one particular category is likely to cause some consternation in Singapore

SINGAPORE

The first Certificate of Entitlement (COE) bidding exercise for March 2023 saw most categories record an increase in premiums, with the exception of Cat E which saw a slight dip.

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, premiums went up by S$1,444, to end the exercise at S$88,000.

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 a much smaller rise of S$500, reaching a final price of S$115,501

Category E meanwhile, which is open to all vehicles except motorcycles, but usually ends up being used for big cars, saw a not-insignificant S$2,001 drop, to finish at S$116,000, still a relative high price in any case.

The headline figure though is one in which we don’t normally cover here in CarBuyer, but is probably worth noting, if only for the implications it brings not just to the industry, but greater society at large.

Premiums in Category C, for commercial vehicles (officially ‘Goods Vehicles and Buses’) ended the bidding at a record-breaking S$91,101, making it the first time that this category breached the 90 grand mark. As you can see from above, it also means that a commercial vehicle COE is now more expensive than that of a Cat A passenger car.

At first glance, the reasoning for this is obvious. Quotas for Cat C are at an all time low, with a mere 43 COEs available for bidding in this latest round. As with basic economics, low supply coupled with strong demand equates to high prices. But dig deeper and it seems that there are more underlying factors at play, and the record-smashing figures are a result of a number of things coming into confluence.

Quota supply for Cat C has been on a downward trend since the end of 2021, with the exception of a short period in mid-2022 when it went up slightly. But the start of February saw the quota slashed pretty drastically, from 78 at the end of January, to just 44 for the following exercise. 

The question is, why has the quota supply essentially dried up? One possible reason is the Early Turnover Scheme (ETS), which allows for owners of older, more pollutive commercial vehicles to replace them with newer, more efficient models, without having to bid for a new COE. Instead, the new vehicles will have a pro-rated Prevailing Quota Premium (PQP), based on the remaining COE tenure of the older vehicle.

The key thing with the ETS though is that the newer vehicle effectively takes over the COE allocation of the older vehicle. And while the older vehicle is technically deregistered, the COE quota doesn’t get recycled back into the system under ETS. This has resulted in the ever-shrinking quota supply for Cat C, even with the allowable 0.25 percent growth rate for this category.

A particular anomaly with this latest exercise is that the number of bids were not especially high (just 65 bids, compared with 136 for the previous exercise), and yet premiums still breached the record. This can arguably be the result of the Commercial Vehicle Emissions Scheme (CVES), which offers significant tax rebates to those who buy cleaner and less pollutive vehicles. The Government had announced that the incentives will be pared back starting from April this year, and as a result, bidders would likely be more desperate to secure their Cat C COEs and register their new vehicles before the deadline in order to enjoy the maximum rebates.

The greater implications of all these is that business owners now face rising costs if they want to procure new commercial vehicles, and the downstream effect is that these costs will eventually pass on to the man on the street. Certainly, some sort of intervention may be required to keep these costs from spiralling out of control, but thus far there has been no indication from the authorities on what sort of measures are being planned to alleviate these ever-spiralling COE premiums.

For now though, the reality is that the cost of doing business in Singapore is simply going to get higher and higher. Still, the fact that a van is probably going to end up being more expensive than a small car is a sign of how absurd and skewed the system has become, and it’s high time that the COE system is comprehensively reviewed to see if it remains fit for purpose in its current state.

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