Some luxury car dealers are gearing up to lure buyers to their showrooms, beginning this weekend, in a bid to clear stocks of vehicles that will be reclassified as premium models from next February.
The move follows changes in the certificate of entitlement (COE) system, announced on Monday, in which a car's engine power will be included as a new criterion. Cars with over 130bhp or an engine exceeding 1,600cc will fall into Category B.
Dealers planning to go on a sales drive include Volvo agent Wearnes Automotive, which is looking to sell models like the S60 and S80. These currently belong to Category A - which caps engine displacement at 1,600cc - but will be re-classified under Category B next year.
Mr Victor Kwan, managing director at Wearnes Automotive, said the dealership will start clearing its 1.6-litre engine cars with "aggressive pricing".
Mr Kwan said the S60, which is usually sold at about $150,000 including COE, is likely to be discounted by up to $20,000. Mr Kwan is aiming to sell up to 30 cars every weekend over the next three months, before prices of these cars go up after reclassification. "It is like the last chance for people to be able to buy Category A luxury cars," he said.
Volkswagen, which will have seven models reclassified under Category B, said nearly half of its prospective customers are likely to pay higher prices for the popular Golf models come February.
While it plans to ramp up sales, it will confirm its prices or whether to give discounts later.
Volkswagen spokesman Colin Yong said that his company is likely to revise its line-up of cars, possibly bringing in more diesel models that have low horsepower but high torque levels.
The new engine output criterion is seen as a response to growing concern that luxury cars are crowding out mass-market cars in the small-car category.
Although a clutch of luxury models will be moving over from Category A to B next February, the agent for mass-market car brand Honda said it is "too early to be rejoicing". For instance, the Category A premium was $77,304 during the latest tender exercise last week - higher than for Category B, it pointed out.
Honda agent Kah Motor's general manager Nicholas Wong said: "If people are rational and don't rush to buy cars now, then we might be able see prices stabilising."
The change in COE criteria arose from a four-month review of the system. The Land Transport Authority rejected other proposed changes to the system, such as using a car's Open Market Value to re-categorise cars, having bidders pay the amount they bid and having a multiple-car ownership surcharge.
When asked if he was optimistic that the measures would bring down COE premiums, Transport Minister Lui Tuck Yew said on Monday that the new COE system is "certainly an improvement over what we have today".
Transport analyst Lee Der Horng said that other than giving out more COEs to stabilise demand, there is little the Government can do.
"If Category A COE prices still hover at $80,000 or $90,000 in the years (to come), it means people are willing to pay to own a car and other cooling measures will not make a difference."