Year-end bumper crop of COEs expected

It may only be August, but car buyers and sellers have received the first sign that it will be a merrier Christmas at the showrooms in December. -- PHOTO: ST FILE
It may only be August, but car buyers and sellers have received the first sign that it will be a merrier Christmas at the showrooms in December. -- PHOTO: ST FILE

This article was first published on Aug 20, 2014

it may only be August, but car buyers and sellers have received the first sign that it will be a merrier Christmas at the showrooms in December.

The number of cars deregistered last month was the highest in recent years, based on the latest official data.

This, according to industry watchers, is a sure sign that the next certificate of entitlement (COE) quota (November to January) will be a sizeable one - estimated to be double the supply last Christmas.

COE quotas are determined largely by the number of vehicles scrapped in the preceding three-month period.

Last month, 2,724 cars were deregistered - the highest monthly figure in over three years.

Figures for the following few months are likely to be similar, if not higher.

This is because cars bought between 2004 and 2008 - when the most number of COEs were available - are reaching the end of their 10-year lifespan.

SIM University urban transport management expert Park Byung Joon said "it is reasonable to expect the deregistration figure to continue rising until 2018".

And that would "definitely lead to a long-term downward trend" for COE premiums.

He ventured that premiums for cars will dip below $60,000 next year, and "as low as $45,000" in the next three years or so.

COEs for cars are currently in the mid- to high $60,000s.

Dr Park said prices are unlikely to return to the previous lows witnessed in 2006 and 2007, when they fell below $20,000.

"It is not just because Singapore has (a bigger) population now. More importantly, Singapore has more money now."

The imminent deluge of deregistrations poses one challenge though - providing sufficient facilities to store deregistered cars before they are re-exported to countries where second-hand vehicles are in demand.

The number of export processing zones (EPZs), which are gated to ensure deregistered cars are not used on Singapore roads while awaiting re-export, has dwindled from a high of 12 to only two.

The slowdown in deregistrations after 2008 forced many players to close down.

The Straits Times understands that the Land Transport Authority (LTA) is nudging motor companies to start up more EPZs - something which it did during the last deregistration boom.

But companies are cautious, recalling the roller-coaster nature of the business.

Mr Neo Nam Heng, president of the Automobile Importer and Exporter Association, said: "In 2003, land rental was three times less than what it is today.

"We've proposed to the LTA to reduce some of the requirements for operating an EPZ."

For instance, one suggestion is to have the minimum capacity of 400 cars halved to 200.

An LTA spokesman said the authority is considering some feedback it received during a regular meeting with the industry.

christan@sph.com.sg