COE premium for motorcycles dips after change to bidding process; other COE prices are higher

SINGAPORE - Certificate of entitlement (COE) prices rose across all categories except for motorcycles on Wednesday (March 23).

The premium for that category dipped after new measures were introduced on March 14 to moderate premiums.

The COE premium for motorcycles, which saw sustained record highs in recent months, ended slightly lower at $10,501 - a 7.9 per cent drop from the $11,400 seen at the previous bidding.

For cars up to 1,600cc and 130bhp, the COE premium went up by 4.5 per cent from $68,501 to $71,556.

The COE price for cars with larger engines or more horsepower rose by 4.2 per cent from $94,889 to $98,889. 

The category for goods vehicles and buses saw the premium increase by 5.3 per cent from $48,889 to $51,504.

The premium for Open COE, which can be used for any vehicle type except motorcycles but which end ups mostly for bigger cars, was marginally higher at $99,010, compared with the previous bid of $98,890.

The bidding exercise on Wednesday was the first since changes were introduced for motorcycle COEs.

Earlier this month, the Land Transport Authority (LTA) announced that the bid deposit would be raised from $200 to $800, and the validity period of COEs halved from six months to three months.

The amount will be forfeited if the COEs are not used within three months and returned to the pool for bidding. 

These changes were said to be made to “encourage prudent bidding behaviour”.

Mr Rex Tan, president of the Singapore Motor Cycle Trade Association, said the bids submitted in the motorcycle category could have been influenced by the shortened validity period for a secured COE. 

He expects the premium to hover around this level or even post a slight reduction in the coming months. 

Observers said the higher premiums in the car categories could be the result of the continued global supply crunch on semiconductors, which The Straits Times reported in February would lead to delays in car shipments. 

Mr Jeremy Soh, director at Ricardo group of companies, which is involved in vehicular financing, said: “The order for these cars were placed months ago.

“Now that they have arrived, the dealers need COEs to register them, even if it means chasing up premiums.”

Compared with prices in September 2021, COE premiums in the latest bidding exercise were $24,556 higher in the smaller car category and $36,289 more for larger and more powerful cars. 

Car COEs have a validity period of six months, and it would be risky to bid for a certificate in advance of delivery, with shipment dates uncertain, observers said. 

Furthermore, deposits for COE bids in the car categories are at $10,000 each, making them too expensive for dealers to risk forfeiting. 

Mr Samuel Yong, director for marketing and business strategy at Borneo Motors, said that COE premiums for cars smaller than 1,600cc and less than 130bhp may have been driven by fleet and corporate customers and not by end-users.

He said that businesses may be looking to grow their fleets in anticipation of increased business activity as more Covid-19 restrictions are lifted. 

Mr Ron Lim, head of sales and marketing at Nissan agent Tan Chong Motor, attributed the high premiums in the car categories to “speculations and rumours”. 

“The issue is with the low COE quota now. Even without genuine demand, it is easy to drive up prices. 

“Dealers do not want to take chances to bid low and risk chasing COEs later. It is kind of a self-fulfilling prophecy,” he said.

The COE quota for February to April this year was set at 10,452, the lowest since the February to April 2014 period, when 9,127 COEs were available.

This was on the back of an announcement last year by LTA that the vehicle growth rate for cars and motorcycles will be maintained at zero until Jan 31, 2025.