Premium of re-classified small car COE stays firm

[SINGAPORE] THE premium for a small car certificate of entitlement or COE surprised some new car buyers by staying above $70,000 in yesterday's bidding exercise - the first for this re-classified category.

Category A - for cars below 1,600cc - slipped just $726 to $71,564 when many buyers were hoping that it would fall to between $60,000 and $65,000.

Cat B - for cars above 1,600cc - also surprised with a $3,700 fall to $75,300, while Cat E - the open category which currently tracks Cat B - shed $1,807 to $77,003.

Meanwhile, Cat C - for goods vehicles - climbed $1,001 to $51,002, while Cat D - for motorcycles - continued rising, increasing $347 to $3,051. The monthly allocation of motorcycle COEs was cut by 25 per cent for the current February to April quota period.

But it was the strength of the Cat A premium which was the focus of the market. Yesterday's bidding exercise was the first for a re-classified Cat A, which in addition to requiring engine capacity to be 1,600cc or smaller, now limits engine output to 97 kW or 130 hp too. The move is to keep luxury models, which were blamed for soaring premiums, out of this traditional bread-and-butter segment.

Cat B is now for cars above 1,600cc or 130 hp.

As a result, about 40 models have been "upgraded" to Cat B, with approximately 100 models left in the newly defined Cat A. One casualty is BMW, which is no longer represented in Cat A. In yesterday's tender, Cat A was one of the first categories to see bidding action, racing to $64,000 with 45 minutes left to the tender close even as the others remained at $1.

But many in the motor industry had expected Cat A's resilience.

"Dealers of Japanese and Korean cars have been collecting orders over the past two months in anticipation of the February re-categorisation, so they had to bid strongly," said the manager of a European distributor. "But at this level, few will make money."

As for the lower Cat B premium, he attributed it to weak demand because of the Chinese New Year holiday.

"But this is only a temporary dip. With more models in Cat B plus a smaller quota, the next round will see premiums go up," he said.

On the other hand, the manager expects Cat A to eventually soften as dealers raise list prices.

He explained: "With higher prices, some prospective Cat A buyers would prefer to look at a Cat B model."