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A straighter road ahead
AFTER the turbulence of the last two years, motor industry players are hoping for more stability in 2015.
They are looking forward as well to more Certificate of Entitlements (COEs), lower COE premiums, new models, and perhaps, the possibility for some relaxation of car loan curbs. The impending return of the Singapore Motorshow is also welcomed.
"After all the sweeping changes over the last two years, I hope there will be a greater level of stability in the industry and that there will be no more big surprises for car distributors in Singapore," said Steffen Schwarz, managing director of Volkswagen Group Singapore.
Said Koh Ching Hong, managing director of Borneo Motors Singapore: "Consumers should be excited about 2015. There will be more COEs, and also more new models and variants in the market to choose from."
The motor industry continued to be rattled in 2014, although it was probably less traumatic than 2013 when vehicle financing restrictions and a tiered Additional Registration Fee (ARF) structure were introduced.
In February this year, COE Category A was reclassified following an invasion by luxury models into this traditionally bread- and-butter segment. To rein in soaring premiums, Cat A - which requires engine capacity to be lower than 1,600cc - was slapped with an additional limitation of engine output to 130 hp. By the following month, the Land Transport Authority (LTA) had unveiled data to show that the move had led to a higher proportion of less expensive cars being registered with a Cat A COE.
February also witnessed the switch to a three-monthly COE quota. This was shortened from six months to make the system more responsive to vehicle de-registrations and hopefully, smoothen out price fluctuations.
At the same time, a faster rate of deregistration in early 2014 resulted in greater numbers of recycled COEs from the second quarter onwards. It was clear the quota supply was slowly but surely rising after three years of sharp contractions.
Parallel imported cars also regained popularity on the steadily expanding COE quota, with mass market Japanese brands back in favour after having being shunted out by grey European models. The dwindling supply of COEs had caused the trade to shrink drastically in the past five years.
The Carbon Emissions-based Vehicle Scheme (CEVS) was also extended by six months until June 2015, with a view towards continuing the scheme thereafter. Introduced in January 2013 to improve the take-up of green vehicles, cars with low carbon emissions enjoy ARF rebates of up to S$20,000 under CEVS. But those with high carbon emissions have to pay a registration surcharge of up to S$20,000.
By the fourth quarter of 2014, the resounding success of the enhanced Early Turnover Scheme (ETS) had led to a massive reduction in the number of commercial vehicle COEs and the Cat C premium spiked up. ETS encourages the replacement of old commercial diesel vehicles with new Euro 5 ones by allowing upgrading owners to pay a lower, pro-rated COE premium based on the PQP or Prevailing Quota Premium without bidding for a new COE.
But doing so also reduces the number of Cat C COEs available in the forthcoming quota.
Looking ahead for the general car market, Mr Koh said: "There are three points to consider. One is the bubble of about 60,000 cars aged nine to 10 years old. These should be deregistered in the next 12 months and will therefore be recycled as COEs. The second is the quarterly COE quota cycle, while the third is the final clawback in January of 200-plus COEs, which would be added back to the COE cycle from February onwards. Barring any policy changes, these three should fuel better growth than in 2014."