There will be 12.8 per cent fewer certificates of entitlement (COEs) for car buyers and sellers in the next three-month quota period starting next month - and this may push prices up.
In its quarterly announcement yesterday, the Land Transport Authority said there will be an average of 4,241 car COEs per month from next month to April - down from 4,865 in the current quota.
The figures are the sum of COEs in Category A (cars up to 1,600cc and 130bhp), Category B (cars above 1,600cc or 130bhp) and Open, which can be used for any vehicle type except motorcycles, but which ends up mostly for bigger cars.
The quota for commercial vehicles will have the sharpest drop of 30.5 per cent, from an average of 735 COEs per month to 511.
Bucking the trend, motorcycle COE supply will grow by 3.2 per cent to 1,083 per month.
In all, there will be 5,835 COEs per month for bidding - 12.2 per cent fewer than the 6,649 available currently.
Fewer COEs almost always lead to higher premiums. But over the longer term this year, observers said the uncertain economic outlook is likely to temper prices.
Mr Neo Nam Heng, chairman of diversified motor group Prime, said the trade did not expect such a big dip. "The market was expecting a 5 to 8 per cent drop. Prices will definitely go up, and more mass market cars will become too expensive. This will in turn make used cars more attractive," he noted.
"Hopefully, the 20,000-plus cars which had five-year COE extensions in 2016 will be scrapped soon, and the recycled COEs can save the situation in the next few quotas."
Cars with five-year COE extensions cannot be extended further, and must be scrapped.
Ms Jasmmine Wong, chief executive of Inchcape Greater China and Singapore, which distributes Toyotas and Suzukis, said the quota size is not entirely unexpected as "people are holding on to their cars longer, which is reflective of the market sentiment and current uncertainty".
Mr Nicholas Wong, general manager of Honda agent Kah Motor, noted that the contraction in the Open category was especially steep, and that this was "quite a surprise".
He reckoned this was on the back of fewer taxis being scrapped.
Mr Wong said COE premiums will rise unless demand is dampened further by the "economy or the pandemic".
He expects annual COE supplies to continue to shrink till "at least 2023".