Car buyers will have fewer certificates of entitlement (COEs) to contend for in the next three months.
The reduced quota, announced by the Land Transport Authority yesterday, comes on the back of smaller numbers of cars being scrapped earlier this year. This is coupled with the Government applying its zero per cent growth policy on the vehicle population.
While the overall monthly COE quota from May to July will fall by 4 per cent to 8,202, car COEs will take the biggest hit.
The COE supply in Category A - for cars up to 1,600cc and 130bhp - will shrink by 8 per cent to 2,867. In the February to April quarter, there were 3,115 such COEs available for bidding every month.
The monthly COE quota in Category B - for cars above 1,600cc or 130bhp - will also slide by 8 per cent, shrinking from 2,779 to 2,559 for the May-July period.
In the Open category, there will be 1,113 COEs each month for buyers to vie for, a drop of about 1.7 per cent. Open category COEs are mainly used to purchase bigger cars.
Industry players say the move did not surprise them, as there were fewer car owners scrapping their vehicles in the January to March period.
When a car is deregistered, its COE is recycled back into the system. In February, there were just 2,458 Category A cars deregistered, the smallest number in over a year.
Mr Nicholas Wong, general manager of Honda agent Kah Motor, expects COE prices in Category A to increase and the gap to widen against premiums in the bigger car category, Category B.
At the close of the latest COE tender on Wednesday, COE prices in Category A ended 4 per cent higher at $38,510. The premium for Category B finished 0.7 per cent lower at $37,330.
Come July, a more stringent emissions scheme will kick in, which will see more car models slapped with surcharges.
Mr Wong said: "Dealers will be in a hurry to sell off cars with small or even no margins, to trim their inventory. This could put pressure on COE prices."
Singapore Vehicle Traders Association president Michael Lim said that even with the reduced quota, car COE prices will hover between $36,000 and $40,000. "The market is a bit weak," he added. Meanwhile, the monthly COE quota for Category C, for goods vehicles and buses, will increase by 23 per cent to 610 for May-July. For motorcycles, Category D, the monthly quota will increase by 2.7 per cent to 1,053.