NO CROWDS IN SHOWROOMS: To draw prospective buyers back, as well as to reflect the sharp drop in COE premiums, dealers have started lowering car prices. -- ST PHOTO: AZIZ HUSSIN

The drop confounded expectations that prices would rise sharply on the back of a smaller quota.

In fact, early last month, prices rose as dealers bet on a rush for COEs.

But the results of the latest quota, released yesterday, showed otherwise.

COEs for cars up to 1,600cc, such as the Toyota Altis and Nissan Latio, took the sharpest fall, tumbling to $11,009, a 29.4 per cent drop from $15,600 in the previous bidding exercise.

The drop was the biggest in the category in recent memory.

Premiums for cars above 1,600cc fell by 9.3 per cent to $15,889.

The prices for Open category COEs - which can be used for any vehicle type but end up being used mainly for cars - fell by 10.6 per cent to $16,500. Commercial vehicle COEs finished 12.5 per cent lower at $15,889.

Motor traders said there were a variety of reasons for the fall, but pointed to soaring food and fuel prices as a key driver.

For example, a litre of premium-grade petrol now costs $2.309 (Shell's V-Power before discount), and with crude-oil price shooting past US$120 a barrel on Tuesday, fuel costs may go up even higher.

The prices of essential items, such as rice and cooking oil, are also rising globally.

Mr Vincent Ng, product manager at Honda agent Kah Motor, said: 'People are beginning to feel the pinch of rising food prices. What's more, they don't know how high prices will go.'

Mr Gavin Yeo, commercial director of Toyota agent Borneo Motors, said: 'General sentiment about the economy slowing down has made car buyers adopt a wait-and-see attitude.'

Kah's Mr Ng said another reason for the lack of demand was that there is a high proportion of 'young cars' on the road - about 85 per cent of cars here are between one and four years old.

This, coupled with the uncertainty over price rises, means fewer people are looking to change their cars, he said. 'If they already have a car, they see no real urgency in trading in for a new one.'

Indeed, fewer motorists are scrapping their cars.

In the first quarter of the year, 15,150 cars were deregistered, 20 per cent fewer than during the same period last year.

Mr Ng said bread-and-butter concerns hit those in the market for the cheapest cars hardest, hence the big fall in COE prices for cars up to 1,600cc.

Motor traders contacted by The Straits Times say they have noticed fewer people at their showrooms.

In a bid to draw crowds back, as well as reflect the sharp drop in COE premiums, dealers are lowering prices.

Borneo Motors, for instance, has cut the prices of models like the Toyota Altis and Vios by $3,000, to starting prices of $65,388 and $51,388, respectively.

It has also dropped the sticker price for bigger cars like the Camry and RAV4 by $1,500, to starting prices of $89,988 and $98,988, respectively.

Mr A. C. Neo, marketing director of Nissan agent Tan Chong, said his company will also be adjusting prices downwards.

Asked if that would draw buyers back, he said: 'I hope so.''

It could prove to be a long wait though if sentiments like those held by Dr Edwin Ng, 28, a dentist and one-time potential buyer, are widespread.

Said Dr Ng, who had plans to buy a car once he got his driving licence later this year:

'Even if the car is cheaper, month to month, I have to spend more on fuel. With food and other things getting more expensive, I don't want to be in debt right now.'

christan@sph.com.sg

mariaa@sph.com.sg