COE premium hits all-time high of $110,524 in Open category

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SINGAPORE - Certificate of entitlement (COE) premiums hit an all-time high of $110,524 in the Open category on Wednesday (July 6), reflecting market expectations that prices could rise further amid a projected decrease in supply. 

The premium for Open category COE, which tends to be used to register larger cars, rose by 5.9 per cent from $104,400 at the last tender. 

The previous record was $110,500, set in 1994 under a different classification, for cars above 2,000cc.

Premiums also rose across all other categories.

The COE premium for cars with engines smaller than 1,600cc and 130bhp, and fully electric vehicles (EVs) with up to 110 kilowatts of power, went up from $74,989 to $78,001 - a 4 per cent increase.

For cars with larger engines, as well as more powerful EVs, the premium was $107,800, up 1.7 per cent from $106,001.

The motorcycle COE premium rose from $10,302 to $10,889, an increase of 5.7 per cent.

The commercial vehicle COE premium went up by 1.9 per cent from $53,011 to $54,001.

The Straits Times had earlier reported that industry watchers expected to see record-breaking premiums due to projections that the three-month supply of COEs from August to October will be less than that of the current period. 

Their projection was based on the low number of vehicles being taken off the road in the previous months. Deregistration figures recorded from April to June are the main determinant of the supply of COEs for the August to October period.

In Wednesday’s tender exercise, the Open category was the biggest mover among the types of COE. 

Open COEs, which can be used to register any kind of vehicles other than motorcycles, have to be used within three months after they are secured.

Otherwise, the bidder will lose the $10,000 bid deposit. They are also transferable, so motor dealers can hold on to such COEs to use in the future.

Category Current COE premium ($) Previous COE premium ($)
A - Car (1,600cc & below) 78,001 74,989
B - Car (above 1,600cc) 107,800 106,001
C - Goods vehicle & bus 54,001 53,011
D - Motorcycle 10,889 10,302
E - Open 110,524 104,400

Mr Nicholas Wong, general manager of Kah Motor which distributes Honda cars, attributed the spike in the Open category COE premium partly to speculators.

Currently, the oldest stock of Open COEs that can still be used will be from April, and had cost nearly $100,000 a piece.

Traders hoping to profit from reselling the valid Open COEs at a future date would want premiums to keep rising, Mr Wong said.

Bidding for COEs in the large-car category was more muted than earlier, with 695 bids submitted, compared with 822 bids seen at the previous tender. This suggests that car companies have fewer orders this time than before.

There is still one more tender exercise in July before the new quota – expected to be announced next week – kicks in. 

This gives dealers more urgency to secure their needed COEs at the latest tender, in anticipation of a bigger rush for COEs during tenders under the expected reduced quota.

One motor dealer said: “If there were dealers who needed a COE and was waiting for a cheaper COE at the next round, well, good luck to them.”

The record set in the Open category is the second type of COE premium to make history this year after the motorcycle COE premium hit $11,400 in March. 

The previous record premium of $110,500 was set in December 1994 under different conditions.

Besides having more categories – seven instead of the current five – tenders were held once a month, not twice. It was also a closed tender system so bidders could not enter or revise their bids as the exercise proceeded.

COE prices fell in the months following the 1994 record as new government measures were introduced to curb speculation.

Dr Zafar Momin, a former adjunct professor at Nanyang Business School, said that in the current high COE premium environment, dealers will try to shift demand forward and push consumers to buy now, on the fear of prices rising later on.

What he expects is for rational car buyers to hold back on their purchase.

While the restrictive COE supply means that premiums will not fall dramatically, Dr Momin said that it may be possible to see premiums ease slightly and gradually.

This is not accounting for external factors – such as fleet operators needing to register more cars, which will drive up demand and hence COE prices – or the Government stepping in to curb premium increases, like it did in 1994. 

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