SINGAPORE –

You’ve read our earlier story on the quota changes: Passenger car quotas are up slightly, but for everything else, and overall, COE quotas are down. So the results of August’s first round of COE bidding are rather surprising: COE prices rose across the board with all three passenger car related categories seeing significant increases.

Category A, for passenger cars under 1.6-litres and 130bhp, saw the least rise, increasing by $1,710 to plateau at $64,600. Category B and E saw similar rises of just under $4,000, and both categories came to rest at around $69,000.

It’s a curious result, not in the least because the prevailing trends in the market. Because of the increasing age of a large proportion of cars on the road here, de-registrations have been steadily increasing, which frees up more COEs to be released back into the system as the new quota.

Prices have followed suit in 2014: Generally, across the passenger car categories, prices have been on a steady decline since February. There was a small spike in May, and then prices fell again until July’s first round. The price increase we see now is the second one in a row. Given that everyone knows there are more COEs to go round, what gives?

“I think it’s (the defeat of) expectations,” said the sales manager for a Japanese brand. “Everyone’s been reading about quota increases and that COEs will come down soon, but the problem is, if everyone believes that and comes in to buy a car, prices will go up again in the short term.”

As we’ve mentioned often, the COE system is not only ‘a step ahead’, since today’s actions affect tomorrow’s COE price, it’s also intensely reactive. Prices on the dip, everyone expects them to go down, people buy, prices go back up.

This reactive nature is also a result of the way people here buy cars – not by choice of course, but as a result of the ever changing system. Singaporeans are kiasu, that we all know, and buying a car here is a process unique amongst all other consumer goods: Almost no other product could have you buy one week (or month) and kicking yourself the other because you could have had it for tens of thousands of dollars less.

As a result, everyone involved in car buying (from dealers to buyers) is intensely paranoid. “I’m quite sure the price increase came about as a result of people seeing the quota cut for Category E,” added the sales manager. “If you saw it, you’d think “Wah, quota cut by so much, August there will be a huge increase, so I should buy now.”

It’s also likely that panic buying was exacerbated by the launch of two high-profile and big-unit cars to the market: the Mercedes-Benz C-Class and the Porsche Macan. Both cars sold at least 200 units at launch, with many more expected on the way as production ramps up, with current waiting times of at least two months.

It’s no surprise with the COE system everyone has to keep an eye on everyone else. To use a Cold War metaphor about submarine warfare, it’s like having a knife fight in a dark room while everyone is blindfolded.

The only difference is the overseers can turn on the light and bludgeon everyone else at any moment, as a sales manager for a German luxury car brand CarBuyer spoke to echoed similar sentiments.

“I think we’re at a point where both the industry and buyers are very insecure about the entire system. People don’t know what’s going to happen next, and the Land Transport Authority is always talking about monitoring the situation, but not actually delivering any clear direction about long term management. I don’t think the industry, or even buyers, would mind a few months of pain if we all knew there will be a stable COE supply in future. That would make everyone happy – supply is stable, prices would be stable.”

Category A: $64,600
(UP BY $1,710)
Quota: 574
Total bids received: 1,086

WHAT HAPPENED?  The smallest increase of this round of bidding.

WHY?  Category A isn’t seeing much action, given how everything has now been pushed to Category B because of the power rules. Demand for less expensive cars is returning though, as COEs become cheaper.

WHERE WILL IT GO? It should hold steady. At this price level, even popular cars like Honda’s Jazz (which launches in late August) can’t make a huge impression on the market.

Category B: $68,689
(UP BY: $3,688)
Quota: 507
Total bids received: 1,090

WHAT HAPPENED:  A big increase of $3,688 – the first and largest increase since April.

WHY? Quotas have been rising so prices have been dropping. But the popularity of the two big-selling models has pushed up demand momentarily.

WHERE WILL IT GO? Given the de-registration trend, we expect it to even out once the initial glut of ‘I must have it naoooo’ buyers are done.  

Category E: $69,001
(UP BY $3,999)
Quota: 245
Total bids received: 429

WHAT HAPPENED: The largest increase of all, almost $4,000 flat. It’s the biggest price rise for Cat E this year.

WHY? Traditionally, only dealers expecting orders on Cat B cars would stock up on Open certs. But with Cat A and B less than $5k apart, everyone else is now looking in for fail-safes too.

WHERE WILL IT GO? Given the market pressure and insecurity, it will go up, but not as dramatically as this round.

READ MORE: 

5 Myths About The COE System