Demand for old cars for rental slows scrappage

Slowdown in deregistrations as taxi app firms snap up near-COE-expiry cars for their fleets

Morning rush-hour traffic on the Pan-Island Expressway.
Morning rush-hour traffic on the Pan-Island Expressway. PHOTO: ST FILE

The number of cars taken off the road has slowed, contrary to expectations, as taxi app operators like Uber and GrabTaxi snap up older vehicles to grow their rental fleets.

According to the Land Transport Authority, car deregistrations slowed to 5,191 last month, 16 per cent lower than July's figure and the second-lowest figure this year.

Motor industry players were expecting the opposite - more cars taken off the road as their certificates of entitlement (COE) reach expiry at the end of the 10th year.

More than a third of Singapore's car population is between eight and 10 years old, but the recent phenomenon may be putting the brakes on the scrap rate.

Taxi app firms Uber and GrabTaxi are snapping up older cars and renting them out as "limousines" which ply like "on-call cabs". So while a 91/2-year-old car may previously have gone to the scrapyard, it remains on the road for another six months.

Because the rental rate of such old vehicles is low, they are proving to be popular with former cabbies as well as people who are willing to be part-time drivers in order to have access to a car.

Prime Group, a diversified motor group which is a huge supplier to both Uber and GrabTaxi, says demand is growing strongly.

Mr Neo Nam Heng, its chairman, estimates the two operators now have a combined fleet of more than 2,500 cars. That is more than Premier - the fourth-largest taxi company here - has in its fleet.

The low rental rate and higher fares for a limo ride mean drivers can earn more than cabbies. They also spend less on fuel as they do not cruise around for fares, which are made through the booking apps.

The Straits Times understands full-time drivers make around $5,000 a month, compared to $3,150 for a two-shift Comfort cabby. "We have teachers, electrical engineers, even a pilot, as part-time drivers," said a Uber contractor.

New LTA regulations governing third-party taxi apps may not affect these limo drivers either.

Among other things, the Third-Party Taxi Booking Service Providers Act - passed in May but yet to be implemented - disallows surge pricing under which charges rise exponentially in tandem with real-time demand.

Motor traders expressed concern over the slowdown in the deregistration rate, as it largely determines the COE supply. Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, noted the reduction in deregistrations last month amounted to nearly 1,000 vehicles.

Motorists are also extending the lifespan of their cars, contributing to fewer being taken off the road. In the first eight months of the year, there were 3,520 five-year revalidations and 982 10-year ones - double and one-third more than last year's 12-month figure, respectively.

A version of this article appeared in the print edition of The Straits Times on September 23, 2015, with the headline 'Demand for old cars for rental slows scrappage'. Print Edition | Subscribe