The certificate of entitlement (COE) price for smaller cars plunged to its lowest level in almost seven years at the latest tender yesterday, as a new emission standard kicked in and bidding from private- hire firms dried up.
The COE price for cars up to 1,600cc and 130bhp finished 16.1 per cent lower at $36,001 - the lowest since November 2010. At less than 10 minutes before bidding closed at 4pm, the premium was still at $1.
The COE price for cars above 1,600cc or 130bhp closed 3.9 per cent lower at $49,000.
Open COE premiums, which can be used for any vehicle type except motorcycles, closed 4 per cent lower at $48,005.
Even though motor traders were expecting prices to soften, many were surprised by the drop in the small-car premium - the sharpest in recent memory.
"One reason is that there is little or no more backlog, as the market had rushed to clear non-Euro 6 cars before Sept 1," said Mr Ron Lim, general manager of Nissan agent Tan Chong Motor. He was referring to the new Euro 6 emission standard that kicked in this month. A number of cars, including popular models, are no longer available because of the more stringent standard.
Mr Neo Nam Heng, chairman of diversified motor group Prime, said private-hire giants Uber and Grab "have cooled down", adding: "Their fleet expansion has come to a halt since new private-hire regulations started in July. Drivers are also dropping off, and returning cars.
"Also, the economy is not doing well. Many expats have left. As I've said many times before, there are more than enough COEs to meet demand. And this is just the beginning. When the new VES kicks in, premiums will drop by another $10,000."
He was referring to the new Vehicular Emissions Scheme, which starts on Jan 1 and imposes higher surcharges on emissions of carbon dioxide as well as four other pollutants.
Many cars that qualify for tax rebates today will lose their rebates, and some may even attract surcharges under the scheme. Dealers will have to absorb some of the price increase, meaning they will have smaller margins to bid for COEs.
The low small-car COE price is expected to draw buyers back to showrooms in droves. But Tan Chong's Mr Lim does not think it would lead to a COE spike. "Without the private-hire players, things are more manageable," he said. "Their bidding distorted real demand."
Meanwhile, the commercial vehicle COE price inched upwards by 2.4 per cent to end at $43,002 - higher than the small-car premium. The motorcycle premium finished 53.8 per cent higher at $5,402 - a strong rebound after last round's correction.
Continued demand from courier and food delivery companies may have contributed to the rise.