COE supply dips as zero-growth cap kicks in

For the February-April quota, the big-and small-car categories will have 5,894 COEs in total, 3.5 per cent fewer than now. If Open category COEs are included, car buyers on the whole will see a 1.5 per cent dip in supply to 7,026 from next month.
For the February-April quota, the big-and small-car categories will have 5,894 COEs in total, 3.5 per cent fewer than now. If Open category COEs are included, car buyers on the whole will see a 1.5 per cent dip in supply to 7,026 from next month.ST PHOTO: DESMOND WEE

Car buyers will have slightly fewer certificates of entitlement (COE) to vie for in the next three months as the first "zero-growth" quota kicks in.

The Land Transport Authority announced yesterday that the overall monthly COE supply will shrink by 1.1 per cent to 8,544 for the February-April quota.

The COE supply for bigger cars (above 1,600cc or 130bhp), commercial vehicles and motorcycles will all increase marginally.

The Open category, which can be used for any vehicle type except motorcycles, will see a 10.4 per cent growth to 1,132 COEs a month.

But the total number of certificates is pulled down by a 7.3 per cent shrinkage in COEs for smaller cars (up to 1,600cc and 130bhp).

Buyers and sellers of these bread-and-butter cars will have 3,115 COEs a month, down from 3,360 in the November-January period.

Together, the big-and small-car categories will have 5,894 COEs, or 3.5 per cent fewer than now.

But if Open COEs are included, car buyers on the whole will see a 1.5 per cent dip in supply to 7,026 from next month. Open COEs have usually been secured mostly by big-car buyers and sellers.

This is the first quota affected by the new zero vehicle allowable growth rate. The growth cap - from an allowable growth of 0.25 per cent a year - applies to all except commercial vehicles.

The growth rate for commercial vehicles will remain unchanged at 0.25 per cent until the first quarter of 2021 to give businesses more time to improve the efficiency of their logistics operations and reduce the number of commercial vehicles they require. From next month, the monthly average quota for commercial vehicles will inch upwards by 0.8 per cent to 493.

Motor traders were not surprised by the new quota. A spokesman for Hyundai agent Komoco said: "It is well within expectations. And I think there will not be any big changes till the second half, when far fewer cars will be deregistered."

With zero growth in place, car COE supply is now determined solely by the number of cars scrapped.

Despite the sizeable shrinkage in the small-car COE quota, dealers do not expect premiums to rise significantly. This is because sellers generally have thinner margins now that they have to absorb part of the cost increase brought on by a new emission tax. Under the Vehicular Emissions Scheme, many cars which previously had tax breaks are now in the neutral band. And those previously in neutral face tax surcharges.

A version of this article appeared in the print edition of The Straits Times on January 19, 2018, with the headline 'COE supply dips as zero-growth cap kicks in'. Print Edition | Subscribe