Car COE premiums seen falling by up to S$10,000 in 2018

Singapore

PASSENGER car certificate of entitlement (COE) premiums could slump by S$10,000 to S$15,000 next year, but buyers are unlikely to benefit from lower car prices.

This is because the fall in premiums may be a reaction to widespread surcharges anticipated under the upcoming Vehicular Emissions Scheme (VES).

VES replaces the current CEVS or Carbon Emissions-based Vehicle Scheme on Jan 1, 2018.

As VES measures five pollutants instead of just one and is more stringent, some popular models which now enjoy a CEVS rebate of between S$5,000 and S$30,000 will not only find the incentive dropped but perhaps replaced by a VES penalty of S$10,000 or S$20,000.

These include Singapore's top three models - the Mazda3, Toyota Corolla Altis and Nissan Qashqai.

As these COE Category A models migrate to the VES surcharge bands, they are likely to be joined by bigger and popular Cat B models such as the Toyota Estima and Alphard/Vellfire.

So if a model that enjoys a S$5,000 rebate ends up liable for a S$10,000 surcharge from Jan 1, this effectively raises its list price by S$15,000.

Hence, Neo Nam Heng, chairman of the Prime group of companies, projects a "minimum S$10,000 to S$15,000" drop in COE premiums.

"It will happen in the first quarter," he said. "When VES kicks in, the whole market will face a big readjustment. VES will have a very heavy impact across all models, except commercial vehicles."

Consumers will not be able to absorb the sudden increase from the VES surcharge, he added.

"For any fundamental increase in the vehicle tax structure, another part must come down to compensate for it. The government is not changing ARF (additional registration fee), so the only possible change will be to COE," explained Mr Neo.

But Ron Lim, general manager of authorised Nissan distributor Tan Chong Motor Sales, is not so sure.

He said: "If everything remains constant, VES will have an impact on the market and the majority of cars will become more expensive. That is all we can conclude at this moment. Whether it will correspond with a drop in COE to mitigate this remains to be seen."

One factor that makes it difficult to predict is the COE quota.

Mr Lim said: "The quota will be on the downtrend from next year. It will drop about 3-5 per cent every quarter."

Meanwhile, the sales director of a luxury dealership said that it was anybody's guess what the swing in COE premiums would be as it would take a while for the market to absorb the price increase from VES.

He added: "But after a few months, it will stabilise because Singaporeans have a short memory."