August 2020 sees another drop in COE quotas, and while prices are stable, there’s a already harbinger of price increases on the horizon : motorcycles

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SINGAPORE

By any measure, 2020 has been a crap year. But for car buyers, it’s going to get worse because COE prices are going to climb. 

That’s what we’ve been saying for quite some time.

Why? In a nutshell, many of the cars/bikes on the roads now are less than five years old, i.e. they won’t be deregistered, and that directly chokes the COE supply. 

‘Wait’, you say, ‘but COE prices are stable!’

For now, yes. In August, COE prices rose but only incrementally. From the last round of July to the first round of August, Category A went up by $301 (less than one percent), while Category B rose by S$2,101. That’s 5.6 percent, sizeable, but not eye-raising at all. 

But there’s possible harbinger of The Dreaded Price Rise: Cat D, or motorcycles. 

Motorcycle COEs have skyrocketed in the past decade from mere hundreds to now multi-thousands. Cat D had sat at a stable sub-S$5,000 level for the first quarter of the year. After the circuit breaker on July’s first round though, it shot through the roof, going from S$4,489 to S$7,702, or 172 percent of what it once was. 

Coincidentally, the result for August’s first round is S$7,701, so this is not a fluke result. Cat D (motorcycle) prices actually fell in July’s second round, down to S$6,510, which showed that pent-up demand from circuit breaker had in fact eased off. 

That’s a two-wheeler problem too bad for them, right? No, it’s a COE problem and thus affects all vehicles, passenger cars included.

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With the August-October COE quota announced, it shows quota drops for all categories, in line with what we’ve pointed out : If vehicles are not de-registered, then new COEs do not come into the system. 

The motorcycle COE price jump is due to the shrinking quota – it’s dropped from 869 units in each round of July, to a mere 503 units per round in August, 58 percent of what it was. Car COEs have shrunk too, but not by such a large proportion – Cat A has gone from roughly 1,300 units per round, to 1,000 (30 percent) and Cat B from 1,300 down to 930-ish units, also a third. 

The good news is, while we see COE quotas shrink, the car market plays friendly and dealers know to avoid fluctuations unless absolutely necessary. Contrast that to a motorcycle, where the mass market models could be crucial to earning a living. 

To quote a motorcycle dealer CarBuyer.com.sg spoke to: “Guys who are buying mainstream bikes at S$7k COE price levels – they really need the bike.”

Motorcycles are not cars, that much is certain.

A COVID-driven recession will reduce the number of potential car buyers yes, but recall that 2013 we were recovering, but not quite out of the doldrums just yet. What was the COE situation back then? 

Low-quota = high COE prices: In 2013, the Cat A and Cat B quotas (per round) were below 400 units, and COE prices for both were from the S$60,000 to S$90,000 range, and it was the year Mercedes-Benz was the top-selling brand here, while Porsche sold (363) more cars than Kia (268), Ford (208), and Subaru (201).  

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