LTA calling surprise meet with motor traders on Monday

The Land Transport Authority is calling a surprise industry-wide meeting with motor traders today, sparking speculation that it will announce more changes to the certificate of entitlement system. -- ST FILE PHOTO: CAROLINE CHIA
The Land Transport Authority is calling a surprise industry-wide meeting with motor traders today, sparking speculation that it will announce more changes to the certificate of entitlement system. -- ST FILE PHOTO: CAROLINE CHIA

Some traders think more changes to COE system might be in store

The Land Transport Authority (LTA) is calling a surprise industry-wide meeting with motor traders today, sparking speculation that it will announce more changes to the certificate of entitlement (COE) system.

The authority - which refused to comment on the meeting - is expected to release details on the next six-monthly supply of COEs mid-January.

Observers said the number of COEs is expected to fall by double-digit levels across the car categories, with supply already at its lowest since the system started in 1990.

This will mean premiums - hovering between $72,000 and $80,000 now - could go higher before settling down in the latter half of the year, when the quota is expected to expand appreciably.

Motor Traders Association president Glenn Tan said: "I would think that they (the LTA) are worried that COE prices will shoot up further, especially with the smaller supply expected in the next six months."

Observers said if premiums approach or breach $100,000 - which Mr Tan does not rule out - it will prompt the authorities to take action.

The last time premiums inched towards this psychological barrier - in January last year - the Monetary Authority of Singapore promptly announced a drastic cap on car loans in February.

The cap restricts car loans to 60 per cent of purchase price and tenure to five years.

This cooled COE premiums down to around $60,000-plus. But premiums soon headed north again, with Category B - for cars above 1,600cc - at just under $80,000 now.

"They may be wondering why COEs are not coming down," Mr Tan said. "And they want to find out from us."

Other industry players, however, expect the authority to announce more changes to the system, which was tweaked just last year.

Singapore Vehicle Traders Association secretary Raymond Tang said: "They might split Category C (for commercial vehicles) into two - one for big vehicles and one for small."

This will address longstanding criticism that the current categorisation for commercial vehicles is inequitable.

"It can't be that big trucks and buses compete with small panel vans," said Mr Tang, adding that the LTA had already addressed a similar inequity in Category A, which is for cars up to 1,600cc.

After a long review, the authority announced last September that cars qualifying for Category A must not produce more than 130bhp in engine power, on top of the existing cap on engine size.

This removes premium brands like Mercedes and BMW from Category A, and reinstates a more level playing field for mass-market brands.

Other traders said commercial vehicles might even be removed from the current COE supply formula, which is based on the number of vehicles scrapped in the preceding six months, as well as an allowable annual growth rate of 0.5 per cent.

Having a separate formula for commercial vehicles will also immediately mean more COEs for businesses, as the category no longer has to contribute part of its allocation to the Open category.

Yet, others speculate that the LTA will do away with Open COEs altogether.

Although Open COEs are meant to add flexibility to the system as they can be used for any vehicle type, they mostly end up exclusively for bigger cars.

There is also talk that the LTA will put off a clawback of COEs oversupplied in 2008 to 2009, to ease the immediate crunch.

Meanwhile, there have been calls from quarters such as the Automobile Association of Singapore and transport academics for a top-to-bottom overhaul of the COE system.

Indeed, some have questioned if the system is still relevant.

Mr Tang said: "If we go for zero growth rate, why would we still need COEs? It'll simply be a replacement system - one new car for every car scrapped."

But Transport Minister Lui Tuck Yew said in an interview with Bloomberg on Wednesday that Singapore will still need the quota system for the "short and medium term".

christan@sph.com.sg

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