New EV models, luxury brands keep Cat A COE prices high

Since January, the price of certificates of entitlement (COEs) for smaller, less powerful cars has risen more than the price of COEs for larger, more powerful models.

Until 2024, the Category A COE price has ranged between $20,000 and $30,000 below Category B.

But at the

second tender exercise in July,

the premium for Category A COE was $8,101 below that of Category B, the closest it has been under the current system. At the

most recent tender

that closed on Oct 23, the gap between the two categories stood at $10,990.

Category A COEs have traditionally been used to register mass-market cars – like those for families with young children – as opposed to Category B COEs, which are for larger and more powerful, luxury vehicles.

The rising Category A COE premium means mass-market cars are becoming more expensive, and buyers of such models may find them increasingly unaffordable due to the higher price tag.

A new Toyota Corolla Altis currently costs $175,888 with a guaranteed COE, $1,000 more than in 2023, and $33,000 more than the 2022 price.

In contrast, the price of a Category B COE luxury car like the Mercedes-Benz C180 has fallen by $31,000 from its 2023 level to $307,888 with COE in October, due to premiums coming down from record highs in 2023.

The rising Category A COE price can be attributed to the deluge of electric vehicle (EV) models and luxury brands muscling into this segment, as well as owners of large premium models trading in for entry-level Category A COE offerings from the luxury brands.

Electric cars draw from the same pool of COEs as non-electric ones, but buyers

qualify for up to $40,000 in tax rebates,

which is part of the Government’s effort to lower the upfront cost to encourage EV adoption. This gives car dealers a bigger budget to bid for COEs for EVs compared with non-EVs, which do not get such support.

There are more EV models available under Category A in 2024. Some that were initially launched as Category B models – such as the MG4 and Omoda E5 – moved into Category A in 2024 when lower-powered versions were introduced.

The COE categorisation for EVs is based on their power output. EVs with up to 110kW come under the Category A COE.

Mr Ron Lim, head of sales and marketing at Nissan distributor Tan Chong Motor, said the Category A COE segment is “overcrowded”.

“The pie for Category A COE is growing gradually, but new models and players are coming by the truckload. So you can imagine the outcome when everyone wants a piece of the pie,” he said.

“Moreover, most of the Category A ‘newcomers’ are actually EVs that can easily channel the huge incentives into bidding for COEs,” he added.

In the first nine months of 2024, eight new Chinese EV brands were introduced in Singapore, adding to the four that were already here before the year began. More are expected to be launched here in the coming months.

Chinese EV brand BYD, which has been in Singapore since 2016, appointed multiple new retail partners in 2024. The majority of dealerships here work with only one partner.

Automotive consultant Vincent Ng said the larger dealer network plays a part in powering BYD’s sales. This, in turn, fuels demand for COEs, pushing up the premium, particularly in Category A, where the brand has a big presence.

Besides mass-market EV brands competing in Category A, luxury marques are also muscling in with both EV and non-EV models.

BMW launched its iX1 and iX2 EV models, both tuned to make 110kW of power, in 2024. The BMW iX1 costs $277,888 with a Category A COE, while the iX2 costs $10,000 more. In other countries, these models have higher motor outputs.

Motor industry observers said dealers selling luxury brand models usually have more financial muscle to bid more to secure COEs than those selling mass-market models, where profit margins are thinner.

Lower-powered, Category A COE luxury cars appeal to buyers who are upgrading from mass-market models, as well as owners of larger cars who do not want to pay for the higher-end models.

This happened in 2023, when the premiums for both car COE categories were rising sharply, and continues in 2024.

BMW Eurokars managing director Jason Lim said there are customers giving up their Porsche Macans – a luxury, Category B COE car – for models in Category A such as the BMW X1 and X2. The petrol-powered BMW X1 retails for $256,888 with a Category A COE.

“Nowadays, even Cat A cars are quite good in terms of size, so customers don’t mind,” Mr Lim said.

Industry sources say more new EV brands are expected to be launched in Singapore, many of them offering Category A COE EVs.

Luxury car brands are also not cutting back on introducing Category A COE entry-level models.

Given these factors, the Category A COE premium is not likely to come down, short of big changes in the market such as a change to the tax incentive structure or the way cars and EVs are categorised in the COE system.

What this means is that the price of mass-market cars is set to remain high, and those hoping to secure a Category A COE for such models may find themselves increasingly priced out.