In all, 115,946 COEs will be available for bidding, Transport Minister Raymond Lim announced in Parliament yesterday. This is down from 125,353 last year.

The number of car COEs will contract by 8.5 per cent, commercial vehicle COEs by 4.5 per cent, and those for motorcycles by 2.9 per cent.

The overall shrinkage is smaller than the 10 to 30 per cent cut which many motor traders were bracing themselves for.

Also, the supply will still be among the largest since the system started in 1990.

Mr Cheah Kim Teck, chief executive (motors) of multi-brand Cycle & Carriage, said the reduction was 'not as drastic as we thought'.

'It's a reasonable approach to have a soft landing,' he said, adding that cuts might be 'more aggressive' in future when the public transport system improves.

Mr Raymond Tang, managing director of parallel importer Yong Lee Seng Motor, had expected the cut to be bigger: 'The number of vehicles scrapped in the last six months averaged 5,000 to 6,000. But the new quota actually provides for over 7,000 a month. I think there might be another cut in October.''

COE supply is determined largely by the number of vehicles taken off the road and any over or under-estimation is corrected in October.

Despite what car dealers described as 'good news', the smaller-than-expected cut should still push premiums up.

Mr Mark Choong, managing director of Toyota distributor Borneo Motors, said: 'The average premium for cars might just cross $20,000 and stay there this year.'

Car COE prices have been hovering around $16,000 in the past year. The last time premiums breached $20,000 was in 2005.

Prices of cars are expected to rise in tandem with the supply shrinkage, although the strong Singapore dollar and this month's 10-point cut in the Additional Registration Fee - the main car tax - could mitigate any increase.

Motorists who are mulling over when to change their cars need not hurry, observers say. This is because the value of their existing cars would probably rise if COE premiums climb. As for those who are in the market for a car for the first time, now is as good a time as any.

Next year, COE supply will shrink further as the Government halves the annual allowable vehicle growth rate to 1.5 per cent.

But before they rise, premiums could dip. Traders said 'panic bidding' in anticipation of a sizeable cut in supply had pushed premiums up in the last two exercises.

christan@sph.com.sg