Luxury and premium brands have crowded out mass-market makes in the small-car segment.
And imminent changes to the certificate of entitlement (COE) system that seek to give mass-market cars a more equal footing may take time to reverse the trend, if at all.
According to trade figures obtained by The Straits Times, brands like Mercedes-Benz, BMW and Volvo accounted for 70 per cent of new car sales in the up-to-1,600cc segment in the first seven months of the year.
This was up from less than 50 per cent in the same period last year, and less than 1 per cent five years ago.
The best-selling brand in this segment in the January-July period was Volkswagen, with nearly 1,500 cars.
This was followed by Mercedes-Benz with about 1,200, and BMW with some 500. The numbers excluded parallel imports.
Collectively, the market share of these brands has been growing in recent years on the back of a couple of factors.
First, many brands - typically European - started making cars with smaller engines about five years ago to meet stricter emission standards in Europe.
Also, COE prices have soared in the last three to four years, allowing sellers with fatter margins - typically those representing luxury and premium brands - and buyers with deeper pockets to outbid others for COEs.
The COE price for cars up to 1,600cc is now above $77,000, up from $68,000 the same time last year, and $9,500 five years ago.
The upward spiral has been fuelled by a shrinking supply of certificates.
The Government is reviewing the COE system to level the playing field for sellers and buyers of bread-and-butter cars such as the Japanese and Korean brands.
When announcing a review earlier this year, Transport Minister Lui Tuck Yew said the Government wants "to make sure Category A (COE for cars up to 1,600cc), which is intended for buyers of smaller, budget cars, retains its original purpose".
The Government is expected to announce changes soon.
But motor traders are not holding their breath for any immediate impact. Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, said: "The situation could remain skewed or worsen between the time of announcement of changes and implementation."
He added that many mass-market brands - mainly Japanese - are also hard pressed to clear existing stock before a new vehicle emission standard comes into effect from January.
The inability of these brands to compete against the premium and luxury makes for COEs amplifies their problem, he noted.
Other industry players are hopeful that changes should eventually bring back some social equity into the system.
Mr Vincent Ng, product manager for Honda agent Kah Motor, said: "Maybe Jazz and City sales will come back again."
Sales of the two Honda models, along with longstanding staples like Toyota Corolla and Nissan Sylphy, have been overtaken by cars from Mercedes-Benz, BMW and Volkswagen.
