Policy-makers who rolled out heftier taxes for higher-end motorcycles in February must be scratching their heads.
By applying tiered additional registration fees (ARF) on bikes such as Ducatis, Harleys and BMWs, they expected demand for these bikes to drop and bring down motorbike COE premiums.
But the opposite has happened. Since the tiered taxation, motorcycle COE has set two new records - $7,483 at the first tender of last month and $8,081 at the second exercise which ended on Wednesday.
The latest rate is substantially higher than the $6,500 average of the past 15 months. So, what is happening?
The Singapore Motorcycle Trade Association reckons the phenomenon has to do with high-end buyers downgrading to smaller models after the new taxes came into effect.
Instead of, say, a $50,000 model, they have moved to a $40,000 machine. With the savings, they are more willing to "splurge" on a COE.
"They don't care how much the COE is, they just want their bike now," says Mr Norman Lee, the association's honorary general secretary.
Economists like Dr Jochen Krauss call this behaviour "substitution effect", where consumers faced with a price rise (or income fall) will replace costlier goods and services with less expensive alternatives.
Dr Krauss, a pricing expert, says the tiered-ARF move was "hard to understand".
"It's merely shifting demand from one motorbike to another type of motorbike," he tells The Straits Times. "You're not discouraging demand, but shifting demand."
But motorbike premiums have been climbing even before the tiered- ARF move. It has gone from below $2,000 in 2013 to above $6,000 in 2015. The trebling of rates in two years is likely to be driven by several factors.
First, persistently high car COE premiums. As the car COE quota shrank, premiums soared. They breached $90,000 in late 2012 and would have crossed $100,000 if the Monetary Authority of Singapore had not implemented car loan curbs in early 2013. But even after that, premiums hovered around $70,000.
This might have nudged marginal buyers to consider motorcycles instead of cars, thus fuelling the bike COE spiral.
A proliferation of motorbike reliant food delivery services during the period added fuel to fire. Providers such as UberEats, Deliveroo and Food Panda have stoked demand for motorcycles along with the existing ones from fast-food companies such as McDonald's and Pizza Hut.
Demand from these companies is showing no sign of abating.
At the same time, the supply of motorbike COEs has been shrinking because certificates contributed by two-wheelers to the Open category are used up mainly by car buyers (who outbid motorcyclists). When the COE of these cars expire, they are recycled back to the car quota.
The reality of shrinking bike COE quota is now starker on the back of heightened demand from bikers whose rides have expired or are near expiry.
Between 2006 and 2008, more than 32,000 motorcycles were registered. Replacement demand from their owners - who now have fewer COEs to bid for - is contributing to the high premiums.
Furthermore, some motorcycle dealers may well be hoarding COEs to corner the market. Since motorbike certificates are transferable, dealers can sell certificates which they do not need at a profit.
The authorities made car COEs non-transferable two decades ago to eradicate this form of speculative activity which drove car COEs to more than $110,000 in 1994.
Although this practice has been around from day one in the motorcycle market, its impact becomes more acutely felt when demand is high and supply is low.
Dr Krauss, a managing partner of strategy and marketing consultants Simon-Kucher & Partners, believes escalating motorbike COE will have larger consequences.
"The big problem I foresee is those who need a bike for a living will be priced out," he notes. "The effects (of costlier motorbikes) will also trickle down to other areas of the economy."
