COE premiums for larger cars climb to $99,000

Certificate of entitlement (COE) prices rose yesterday across all categories except for motorcycles, which 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 the 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 $98,890 at the previous tender.

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

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

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

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

Mr Jeremy Soh, director at the Ricardo group of companies, which is involved in vehicular financing, said: "The orders 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 last September, 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 amid uncertain shipment dates, 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 businesses looking to grow their fleets in anticipation of increased business activity as more Covid-19 curbs are lifted.

Mr Ron Lim, head of sales and marketing at Nissan agent Tan Chong Motor, said the low COE quota is a factor.

The COE quota for February to April this year was set at 10,452, the lowest in eight years.

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