COE supply to shrink for Aug to Oct period

Weakening consumer sentiment amid slower growth may rein in upward price trajectory

With a record number of car buyers keeping their cars beyond 10 years, replacement demand will be lower.
With a record number of car buyers keeping their cars beyond 10 years, replacement demand will be lower.PHOTO: ST FILE

Vehicle buyers are in for a markedly smaller supply of certificates of entitlement (COEs) for the August to October quota period, in line with a record number of motorists who have extended the lifespan of their old cars this year.

The quota, which is determined largely by the number of cars taken off the road in the preceding three months, will shrink by 16.5 per cent to 4,904 a month for cars. This includes the Open category, which can be used for any vehicle except motorcycles, but ends up mostly for bigger cars.

Individually, the quota for Category A (cars up to 1,600cc and 130bhp) will contract by 25.8 per cent to 2,112 a month. Category B (cars above 1,600cc or 130bhp) will be reduced by 8.6 per cent to 2,083 a month.

The Open category will shrink by 5.3 per cent to 709 a month.

The quota for commercial vehicle COEs will contract most severely, by 27.3 per cent to 566 a month. Motorcycle buyers will have 1,477 COEs a month, or 17.7 per cent fewer.

Industry observers said weakening consumer sentiment on the back of slower economic growth should mitigate the upward pressure on prices that a small quota typically causes.

With a record number of car buyers keeping their cars beyond 10 years, replacement demand will also be lower.

These mitigating factors, however, may not prevent prices from going northwards altogether.

Mr Nicholas Wong, general manager of Honda agent Kah Motor, said: "It depends on how much demand is dampened. And that depends on a mixed bag of factors."

For instance, some of those who renewed their car COEs might decide to scrap them because of reliability issues.

Mr Wong noted that the next quota - November to January - will shrink further.

"Prices will only go up," he said.

Mr Neo Nam Heng, chairman of diversified motor group Prime, concurred. He said Category A "will rebound by at least 20 per cent over the next few months".

"Generally, people will be more cautious because of the weakening economic sentiment, but those who are able to afford the more expensive cars are less likely to be affected," he added. "Price-sensitive customers will be priced out."

In addition, the price gap between Category A and B cars will narrow. Mr Wong pointed out that the quotas for smaller and bigger cars are almost on a par now.


"I won't be surprised if some Category B cars become cheaper than Category A cars one day," he said.

Others said prices will also be influenced by how aggressive private-hire operators are in expanding their fleets over the coming months. They said COE premiums were much higher between 2015 and 2017 despite quotas being larger than now. That was largely because US ride-hailing firm Uber was expanding its fleet aggressively.

Prices, however, started to tumble after Uber exited Singapore in March 2018 despite the quota being smaller.

A version of this article appeared in the print edition of The Straits Times on July 19, 2019, with the headline 'COE supply to shrink for Aug to Oct period'. Subscribe