No more radical changes to COE system for now

[SINGAPORE] After the recent slew of radical changes to the COE (certificate of entitlement) system, the government has given the assurance that there will be no more of those for now.

One of these changes was last month's re-classification of COE Category A.

Senior Minister of State for Transport Josephine Teo said during the Committee of Suppy Debate yesterday that the intent of re-defining COE Category A was "simply to retain Cat A more for mass market car buyers", and early indications are that this objective has been achieved.

Last month, Cat A for cars under 1,600 cubic centimetres (cc) was re-categorised to include an engine output limit of 97 kilowatts (kW) or 130 horsepower (hp). The aim was to keep luxury models out of this small car COE category. Cat A models from luxury makes such as Mercedes-Benz and BMW had been blamed for high COE premiums in the past three years.

But should re-categorisation lead to lower Cat A COE prices, Mrs Teo asked. "Much as we would all like to see softer COE prices, COE prices are ultimately the result of demand interacting with supply," she said.

According to her, the median open market value (OMV) for cars registered since the re-categorisation was $19,000, compared to more than $26,000 before - "a drop of almost 30 per cent".

As to suggestions about re-defining Cat A by OMV instead, Mrs Teo said that OMV can fluctuate "quite significantly" for different batches of the same car due to variations in exchange rates and car model specifications. "This would result in certain cars falling in Cat A at certain times, and in Cat B at others. On the other hand, a technical criterion such as engine power is generally more stable and can be measured accurately."

She added that it is also a reasonable proxy for value when coupled with engine capacity. "This is why we re-categorised Cat A to be based on both engine capacity and engine power."

Mrs Teo said that in the last year or so, her ministry has listened to feedback and made changes to the COE system where sensible. These included taking taxis out of Cat A, lowering the rate at which all vehicle categories contribute to Cat E, lowering the vehicle growth rate to 0.5 per cent, re-categorising Cat A, and shortening the quota cycle to quarterly instead of half-yearly periods.

"The motor industry is still adjusting to these changes. It is probably best to leave things be for a while before introducing further changes."

As for the next generation Electronic Road Pricing system, or ERP2, Mrs Teo said that a tender will be called in the next few months to develop the ERP2 system by around 2020. ERP2 is necessary as the current ERP system is coming to the end of its life.

"If we do not replace the ERP system, it will become more expensive and difficult to maintain and repair," explained Mrs Teo. "With ERP2, we will be able to calibrate the charging for motorists in proportion to the congested road segments they use, which is a fairer approach."

ERP2 can also provide value-added services, such as navigation, payment for roadside parking in-lieu of parking coupons and real time traffic information.

She added: "There will also not be any change in the pricing policy and no new charged roads while we transit to the new technology."

Turning to the growth in car ownership, Mrs Teo said that 45 per cent of households today own a car, compared with 38 per cent a decade ago. Noting how this takes a toll on parking space, she said that every car added to a well-organised car-sharing scheme takes the place of 15 private vehicles. "A shift of just 4 per cent of the existing car population into car-sharing schemes could expand car access to potentially three in four households, without the need to add too much to road and parking spaces."

So, in order to emphasise car access over car ownership, more parking lots in HDB estates will be made available for shared cars.

Regarding diesel commercial vehicles, Mrs Teo revealed that the COE Bonus under the Enhanced Early Turnover Scheme will be doubled from 10 per cent to 20 per cent for vehicles with a maximum laden weight of up to 3,500 kilogrammes. For vehicles with a maximum laden weight of over 3,500 kg, the bonus COE incentive for the replacement vehicle will more than treble from 30 per cent to 100 per cent.

The enhanced scheme, which starts today, will also be extended until end-April 2016 instead of 2015.