The vehicle population in Singapore is controlled through a strict quota system known as the certificate of entitlement, or COE, framework that was rolled out in 1990. A COE is valid for 10 years, with options for a five- or 10-year extension.
Any car that is sold must come with a COE, on top of the cost of the car itself. COE prices are determined through public auctions held twice a month.
There are a total of five categories. Passenger cars tend to fall into Categories A and B.
For cars with internal combustion engines, Category A caps the engine capacity at 1,600cc and power output at 130bhp. For electric vehicles (EVs), the Category A cap is a power output of 110kW.
Category B covers larger or more powerful vehicles that exceed these limits.
The distinction between the two categories is meant to differentiate between mass-market and higher-end models.
This chart shows the price of COEs for private cars. Category A COEs are meant for smaller and less powerful cars and EVs.
Meanwhile, Category B is for larger, more powerful cars and EVs. Historically, the price of a Category B COE is higher than that of a Category A COE.
But in recent years, the gap between the prices of these two COE categories has been closing. This means someone who wants to buy a mass-market Toyota is paying almost the same COE price as someone who wants to buy a Mercedes-Benz.
In 2026, the Category A COE price even exceeded that of Category B in three tender exercises. Now, proposals are being made to review the COE system.
Under a zero vehicle population growth framework for private cars, the supply of new COEs is driven by the number of older vehicles that are deregistered.
The COE supply is made public every three months and is based on a rolling average of vehicle deregistrations over the last four quarters.
COE prices are left to market forces, so premiums tend to be lower if the supply is greater.
Historically, premiums are higher when the quota is smaller.
When COEs are in short supply, Category A premiums shoot up. This happened in 2013. Prices fell afterwards when more COEs were available.
Recently, however, prices have continued to rise, especially for Category A, despite the increase in COE supply.
So what’s causing this surge?
A key driver of the COE price surge is the growing popularity of EVs.
The engine or power thresholds for Category A and Category B cars are clearly spelt out, but carmakers have begun to tune cars, including higher-end models, to fit Category A requirements, which normally cover mass-market cars.
Take, for example, the Tesla Model 3.
The Tesla Model 3 Rear-Wheel Drive (RWD) 110 has a power output of 110kW, putting it in Category A with mass-market cars despite having a higher open market value (OMV).
Source: Land Transport Authority. Figures were taken from December 2025.
Through the use of software, the car’s peak output is limited to 110kW to fit the Category A threshold.
Other variations, such as the Tesla Model 3 Premium Long Range RWD, lack these artificial restrictions and fall under Category B.
As more premium EVs are tweaked to qualify for Category A, demand for these certificates has surged, causing premiums to inch closer to – and sometimes above – Category B’s.
What is the new proposal and how will it change the price of COEs?
With Categories A and B so close in price despite being aimed at different types of cars, the Land Transport Authority (LTA) is looking to tweak the system, taking into account views gathered from discussions with about 200 academics and industry players.
A key proposal is to merge Categories A and B into a single pool for all passenger cars.
Merging the two categories will result in a broader pool of COEs for car buyers and most likely reduce price volatility, but it introduces a new challenge.
Those buying mass-market cars will now be competing directly with those shopping for luxury vehicles.
To level the playing field, LTA is proposing a tiered system in which a surcharge or rebate is applied to the final COE price. This ensures that buyers of luxury cars pay more than those opting for everyday vehicles.
Either a three-tier or five-tier banding system could be implemented, and the median open market value (OMV) of a car could determine which band it will be put into.
Here’s how the prices of cars could change with the rebate or surcharge.
Car prices under the 3-tier band and 5-tier band scenarios are calculated on the assumption that the combined COE price is the average of Cat A and B premiums. Values for the Honda Civic 1.5 Turbo and BMW 216 Gran Coupe are based on the latest COE tender exercise on Oct 7, while those for the BYD Atto 3 are based on the Sept 23 exercise.
OMV refers to the basic cost of a vehicle before taxes, and those with higher values will incur a surcharge tacked on to the COE price. Mass-market cars with lower values will get a discount instead.
What will cars cost under the modified COE system? The Straits Times looks at what rebate or surcharge bands several popular car models will fall under, and how much they might cost.