LTA tweaks calculation of commercial vehicle COE quota to even out supply

SINGAPORE - Buyers of commercial vehicles can expect less fluctuation in the supply of certificates of entitlement (COEs) for such vehicles, after the Land Transport Authority (LTA) revised the way it calculates the quota available for bidding.

The LTA now takes the average number of commercial vehicle registrations under the Early Turnover Scheme (ETS) from the previous four quarters, or 12 months, to calculate the COE supply for each three-month quota period, starting with the current quota for May to July 2023.

Previously, it used the number of ETS registrations from the previous three months.

The LTA told The Straits Times that the change “provides more stability to our COE supply and reduces the likelihood of ETS numbers exceeding deregistrations in a single quarter”.

There would have been 14 commercial vehicle COEs available for tender from May to July 2023 if the LTA had not modified its method for calculating COE supply for this category. This is because the number of ETS registrations from January to March 2023 – used to calculate the COE supply for May to July – exceeded the number of scrapped commercial vehicles captured in the formula after taking away the contribution to Open category COE.

The number of ETS registrations was unusually high in March 2023, with 1,482 such registrations out of 2,512 recorded in the first three months of this year.

With the change, ETS registration figures will be recorded in the same way as vehicle deregistrations in the COE supply calculation. The LTA began using the average number of vehicles deregistered in the past four quarters to calculate COE supply starting with the quota for February to April 2023.

The number of commercial vehicle COEs available for tender is driven primarily by two components: the number of vehicles that were scrapped, which forms the basis of the upcoming COE supply, and ETS registrations, which is deducted from the deregistration figure.

Under the current policy, the supply of commercial vehicle COEs is

allowed to grow by 0.25 per cent a year.

This is set to remain until January 2025.

Under the ETS, the owner of an older commercial vehicle can switch to a new one with cleaner emissions by paying a discounted rate of the COE price instead of having to bid for a new one.

The exact amount payable depends on the existing vehicle model and the replacement model that will be registered under the scheme. The current iteration of ETS kicked in on April 1, 2023, and expires on March 31, 2025.

In 2021 and 2022, ETS registrations outnumbered commercial vehicle registrations using new COEs. The trend continued in the first three months of 2023, where 2,512 ETS registrations represented 86.03 per cent of the 2,920 commercial vehicle registrations for the period.

The dominance of the ETS route to register new commercial vehicles in the first quarter of 2023 may have been driven by the general shortage of commercial COEs available for tender when dealers were rushing to register vehicles before April 1, 2023.

The date was when incentives under the Commercial Vehicle Emissions Scheme

were halved for some vehicles

from $30,000 to $15,000. The ETS benefit was also reduced. In the case of light commercial vehicles, retiring an old van with Euro III emission levels for a new, lower emission model such as a Suzuki Every after the switchover would see the ETS incentive reduced from 45 per cent to 20 per cent.

A stricter emission test protocol also came into force.

Mr Neo Tiam Ting, director of Think One, which deals in commercial vehicles, said there was a big rush in March for ETS-eligible vehicles that can be used to register new vans before April 1. This has since subsided.

In the current three-month period till July, there is a monthly average of 137 commercial vehicle COEs available for tender. This was an increase of 59.3 per cent over the monthly average of 86 such COEs in the previous three months.

The price of commercial vehicle COEs has risen significantly, hitting a

record high of $91,101 in March 2023.

It was $48,889 in March 2022.

With the current elevated COE prices, the resale value of a used vehicle in the open market can be higher than the revised ETS incentive. This makes it difficult for motor traders to source ETS-eligible vehicles for buyers keen to grow their fleet.

Between 2013 and 2022, ETS accounted for 63,449 commercial vehicle registrations, compared with the 61,866 units that were put on the road with new COEs in the same period.

In November 2022, the LTA and National Environment Agency announced that ETS for light commercial vehicles will end on March 31, 2025. The agencies said they would be looking at other means to encourage owners to switch out of older commercial vehicles and buses.

Correction note: In an earlier version of this story, we said that there would have been no commercial vehicle COEs available in the current quota period under the previous calculation method. This is incorrect. It should be 14. We are sorry for the error.