SINGAPORE - The supply of certificates of entitlement (COEs) will rise by 3.4 per cent for the February to April period, the first increase after two quarters of decline.
Overall, there will be an average of 3,144 COEs available for bidding spread across the five categories each month during this period, said the Land Transport Authority (LTA) on Friday.
This is up from the monthly average of 3,040 COEs for the November 2022 to January 2023 period.
With the increase in COE supply, premiums may slip.
The supply of COEs fell in the previous two quarters as fewer vehicles were deregistered.
To reduce supply fluctuations, a new method of calculation was introduced in July 2022. This was used to work out the August to October 2022 and the November 2022 to January 2023 COE quotas.
The quota for February to April 2023 is set using a second revised method of calculation, which was announced on Friday.
Between February and April, there will be 1,010 COEs available monthly in the category for cars with engines up to 1,600cc and 130bhp, as well as electric vehicles (EVs) with up to 110 kilowatts of power.
This is up by 10.4 per cent from 915 a month in the previous quota period.
For larger and more powerful cars and EVs, there will be 860 COEs available for bidding each month, 5.3 per cent more than the 817 available before.
Open category COEs, which can be used to register any type of vehicle other than motorcycles, will dip in supply. On average, there will be 259 such COEs available for tender each month, down 11 per cent from 291 before.
As Open category COEs are mostly used to register larger cars and EVs, this reduction affects the overall supply of COEs for such cars.
Taken together, there will be 1,119 COEs that can be used for large cars and EVs. This works out to be an increase of about 1 per cent over the 1,108 COEs available in the previous quota period.
The supply of COEs for commercial vehicles will be cut the most significantly.
For the new quota period, there will be an average of only 86 such COEs each month, down 37.2 per cent from the 137 before.
The main reason for the reduction is the popularity of the Early Turnover Scheme (ETS), where commercial vehicle owners who switch their older and more pollutive vehicles to newer ones do not have to surrender the COEs or bid for a new one.
In the calculation for the February to April period, there were 1,872 commercial vehicles that were taken off the road via the ETS.
There will be 929 motorcycle COEs available on average each month. This is up by 5.6 per cent from the 880 before.
The supply of COEs is now based on the average number of vehicles taken off the road over 12 months.
For the February to April period, the quota is based on the number of deregistrations between January and December 2022.
The LTA said that this latest method of calculation will “further reduce the quarter-on-quarter volatility of COE supply”.
The calculation method was first revised in July 2022, when the formula was changed to be based on the average number of deregistrations over a six-month period, instead of over the past three months.
If the calculation was based on deregistrations over a period of six months, the total supply of COEs for February to April would have been 8,695 – down 7.9 per cent from the 9,437 under the latest calculation method.
A director of a premium car dealership who declined to be named candidly described the bigger supply of COEs as an “early Chinese New Year gift”.
Mr Michael Wee, managing director of Eurokars EV for MG, said the slightly bigger COE quota is unlikely to have a significant impact on COE premiums.
However, he said it is “psychologically important” for potential buyers, referring to how they may be drawn to car showrooms expecting prices to be lower with the bigger COE supply.
Other industry insiders such as Mr Chong Kah Wei, managing director of Mazda and McLaren, said he hopes that COE premiums will be lower.
However, he pointed out that the supply reduction in the Open category will push prices of such COEs up. This will have an impact on how some dealers will conduct business.
Being transferable, Open category COEs are valuable to car dealers who use them to register vehicles as soon as they close deals, rather than wait for the next tender exercise.
If the price of such COEs rises above the COE premiums for larger cars and EVs by too much, dealers may not be able to promise “immediate registration” to win over customers, Mr Chong said.
When asked if the larger quota will reel customers back in to the showrooms, Mr Nicholas Wong, general manager of Kah Motor, said: “Customers will come in when they see prices coming down. Hopefully, the LTA does not change the calculation again because it makes it hard to plan.”
Mr Ron Lim, head of sales at Nissan agent Tan Chong Motor, said that the LTA seems to be constantly monitoring the situation to avoid huge fluctuations in COE supply and premiums.
“We just have to leave it (in the LTA’s) good hands to manage and not forecast too far ahead,” he said.