30 percent more passenger car COEs for July-Sept 2020 as COE bidding resumes July 6 could keep prices frosty for now

SINGAPORE
COE bidding is finally on schedule to resume. But we’ve always known that – more importantly, will prices skyrocket now that cars can finally be registered after weeks and weeks of backorders?

Three days after the announcement of Phase 2 and the reopening of car showrooms, the Land Transport Authority (LTA) has announced the resumption of Certificate of Entitlement (COE) bidding, which will commence on July 6, 2020. 

The quota from the past three months – April, May and June 2020 – where COE bidding was suspended and showrooms closed, will be doled out over the next 12 months.  

However one third of the April-June quota will be parcelled out over the immediate quarter, which means July, August and September 2020 will see a larger quota boost from the leftovers than October 2020 to June 2021.

The LTA says that is due to “the need to ensure sufficient supply of COEs to meet the orders that have built up during the period of COE bidding suspension, as well as the need to smoothen the supply of COEs to ensure long-term market stability.” 

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According to the LTA’s statement, April to June saw a total quota of 19,490 for all COE categories, with one third of that going to the next quarter it means an additional 6,494 COEs for July to September 2020, and 12,996 additional COEs for October 2020 to June 2021. 

That’s in addition to the normal COE quota, which is determined largely by the number of de-registrations in the preceding quarter. Passenger car population growth is zero, while Category C, commercial vehicles, are allowed 0.25 percent growth. 

The takeaway, as seen from the table, is that July – September’s month COE quota is about a third larger than compared to the previous COE quota (Feb-April 2020). 

That’s a good thing. While many are tightening belts and not considering large purchases here, consider the fact that 1. Singapore’s COE system means car supply is always lower than demand and 2. There has been three months of pent-up demand.

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In addition to 2, dealers have rolled out attractive sales and promotional events – how does $50k off an Audi or S$60k off a BMW sound to you? – since they’re desperate to get the spice car sales flowing once again – like planes, keeping cars in storage costs lots of money, amongst other things.

Our guess is having a 30 percent increase in quota – which would otherwise be shrinking if you look at the trends – will certainly help dampen the effect of a post-circuit breaker COE price spike. 

If you want to look at the full breakdown (be prepared for a lot of math), see the LTA’s annex here. 

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