Wednesday, 23 July, 2014

 
Published July 17, 2014
COE quota to fall 6% from August
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The quota for August to October will be 11,331, or 729 pieces fewer than in the current May-to-July 2014 quota period - PHOTO: SPH

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'Everyone had expected Cat C to be smaller, but premiums still didn't move much.'
- Manager of a commercial vehicle dealership

[SINGAPORE] The number of certificates of entitlement (COEs) will contract by 6 per cent from next month for the next three months.

The quota for August to October will be 11,331, or 729 pieces fewer than in the current May-to-July 2014 quota period.

Category A, for cars under 1,600 cc or 130 hp, will get a 13.1 per cent increase in allocation to 1,143 COEs each month; Cat B, for cars above 1,600 cc and 130 hp, will climb 4.6 per cent to 1,010 COEs monthly.

Cat C and Cat E are the biggest losers come the next round.

Cat E, the open category where the premium currently tracks that of Cat B, will be cut 18.4 per cent to 478 COEs available monthly; Cat C, for commercial vehicles, will slump 33.1 per cent to 515 per month.

Cat D for motorcycles will also suffer a reduction of 8.0 per cent to 631 COEs monthly.

In determining the COE quota, the Land Transport Authority (LTA) considers three factors:

  • The 0.5 per cent per annum vehicle growth rate based on the vehicle population as at Dec 31, 2013;
  • The replacement COEs for vehicles deregistered in the preceding three-month period; and
  • The adjustments for changes in the taxi population, expired COEs and over-projection of vehicle deregistrations in 2008/2009.

With the increase in Cat A and Cat B numbers, the sales director of a mid-sized dealership said that the deregistration rate "was not unexpected", although he had hoped it would be higher because of the relatively large population of cars on the road that are more than nine years old. "I would have thought the owners of these cars would have scrapped them by now. But since they have not, we will probably see the impact closer towards the end of the year," he added.

As for the big cut in commercial vehicle COEs for the next round, he said that Cat C has been particularly affected by the unexpected success of the Early Turnover Scheme (ETS). Under ETS, a buyer does not have to bid for a COE. Instead, he pays a pro-rated COE based on the prevailing quota premium (PQP).

The sales director said: "When each new commercial vehicle is registered under ETS, one COE is effectively removed from the upcoming quota. So the popularity of ETS comes at the expense of the COE quota size."

With the supply of Cat C COEs set to shrink by a third, some dealers expect premiums to start rising, though the manager of a commercial vehicle dealership said that they may not go up by much.

"Everyone had expected Cat C to be smaller, but premiums still didn't move much," he said. "This is probably because of stock issues and lengthy subcontract work for railings and canopies, which are delaying vehicle delivery schedules. Because of this uncertainty, dealers do not bid aggressively for COEs."

Another factor that could restrain Cat C COE premiums is ETS. He explained: "Perhaps future registrations may strike a balance between COE bids and ETS."

The upcoming quota will be the third three-monthly quota since the cycle was shortened from half-yearly to quarterly from February this year.

Analyse historical COE data with the Business Times' interactive tool at http://btd.sg/coetrack