Bigger COE supply fuels hope of lower premiums

Some market observers expect the larger supply of COEs for cars to drive premiums down. Figures released by the LTA yesterday show that the bigger supply comes on the back of more vehicles having been taken off the road in the October to December per
Some market observers expect the larger supply of COEs for cars to drive premiums down. Figures released by the LTA yesterday show that the bigger supply comes on the back of more vehicles having been taken off the road in the October to December period.ST FILE PHOTO

February-April period will see 8.9 per cent rise in the number of certificates available

There will be more certificates of entitlement (COEs) for the February to April quota period, with an average of 8,795 certificates available each month, up 8.9 per cent from the current period.

For car buyers, the increase is slightly sharper at 11.6 per cent, with the number of COEs (including for the Open category) available per month going up from 6,973 to 7,781.

The figures released by the Land Transport Authority (LTA) yesterday revealed that the bigger supply comes on the back of more vehicles having been taken off the road in the October to December period.

A total of 27,775 vehicles were deregistered in the last quarter of last year, up from 26,613 scrapped from July to September.

Some market observers expect the bigger supply of car COEs to send premiums south.

Industry watchers said that if commercial vehicle premiums spike, buyers will dip into the Open category for certificates.

If that happens, car buyers - who typically dominate the Open category - might not see prices falling much.

Mr Neo Nam Heng, chairman of diversified motor group Prime, said: "The private-hire market is saturated, the current economic outlook is poor, interest rates are rising. All these factors, combined with the bigger COE supply, should soften prices."

Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, said that "whether COE prices will drop still depends on overall retail demand and also whether private-hire car companies will continue with their aggressive expansion".

Mr Lim is quite certain though that commercial vehicle premiums will rise.

Firstly, the supply of commercial vehicle COEs will shrink by 10.8 per cent in the next three months. Secondly, more than 15,000 vans, trucks and buses will see their COEs expiring in the first quarter alone - versus fewer than 1,000 fresh COEs available.

Even if half of the owners decided to renew the COEs of their vehicles, demand would still far outstrip supply.

Industry watchers said that if commercial vehicle premiums spike, buyers will dip into the Open category for certificates.

If that happens, car buyers - who typically dominate the Open category - might not see prices falling much.

The February to April supply is also bigger because there were fewer commercial vehicles registered under the Early Turnover Scheme, as well as taxis added to fleets.

Buyers in these two categories of vehicles do not bid directly for COEs, but the LTA accounts for them in the form of deductions in new COE quotas.

The latest adjustment was 1,960, 34 per cent lower than the 2,959 made in the previous quota.

A version of this article appeared in the print edition of The Straits Times on January 20, 2017, with the headline 'Bigger COE supply fuels hope of lower premiums'. Print Edition | Subscribe