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Number of COEs headed for 41% surge from May

Car dealers see slide in Cat A and B premiums, but expect order backlog and deadline for tighter emissions to mitigate fall

THE certificate of entitlement (COE) bonanza continues, with a whopping 41.1 per cent more COEs from next month.


THE certificate of entitlement (COE) bonanza continues, with a whopping 41.1 per cent more COEs from next month.

This follows the 18.3 per cent increase in COEs for the current three-month period from February-April 2015, which also marked the start of the cut in the annual vehicle growth rate by half to 0.25 per cent.

The quota for May-July 2015 will have a total of 19,912 COEs, or 6,637 monthly.

Of these, there will be 2,853 Category A small car COEs per month, or a 44.6 per cent increase from the previous February-April 2015 quota.

Cat B - for bigger cars, i.e. those above 1,600cc or 130 hp - will see a 28.5 per cent rise to 1,856 COEs each month, while Cat E - the open category which currently tracks Cat B in terms of premium - will enjoy a 54.4 per cent jump to 539 COEs monthly.

But it is Cat C - for goods vehicles and buses - which sees the biggest percentage increase of 99.5 per cent to 736 COEs per month, while, Cat D, for motorcycles, gets the smallest hike of 14.6 per cent to 653 COEs.

The big COE jump in Cat C is not a surprise because the take-up rate for the Early Turnover Scheme (ETS) has not been high in past months. Under ETS, owners of diesel vehicles pay the prevailing quota premium (PQP) instead of bidding for a COE, with a discount against the bonus COE period from their old vehicle.

"Since the PQP has been relatively high in previous months, the savings were not substantial enough to tempt customers to change up to a new vehicle under ETS,"' said the manager of a commercial vehicle dealership.

When ETS numbers are low, there are more Cat C COEs for the subsequent quota.

As for the relatively small expansion in motorcycle COEs, one dealer said it may not completely satisfy the current strong demand.

"But I don't think it will also push COE premiums much higher because for most buyers, the COE now costs more than double the machine price," he said.

The Cat D premium is currently at a record S$6,312. The dealer said the motorcycle market is driven mainly by small bikes, and if these bread-and-butter models are priced higher than S$10,000, including COE, demand is likely to evaporate.

But with the big increase in Cat A COEs, small car buyers look like they will soon be enjoying lower premiums. Cat A is currently S$67,749.

"Premiums should be slightly softer over the next three months, but not by much," said George Lee, general manager of Opel and Chevrolet dealer Alpine Motor.

According to him, the industry still has a backlog of orders which were collected in late February after the Cat A premium slipped to a three-year low of S$57,199.

At the same time, Mr Lee said new bookings are still strong, and are expected to get stronger with next weekend's Cars @ Expo.

He added: "Because of this, I believe the bottom for Cat A will only be about S$60,000 in the near term."

Both Cat A and Cat B premiums will "definitely ease", said Nicholas Wong, the general manager of authorised Honda distributor Kah Motor. But any drop will be tempered by the rush to deliver cars before the July 1, 2015 tightening of the Carbon Emissions-Based Vehicle Scheme (CEVS).

From the second half of 2015, most popular mass market models will lose at least S$5,000 in CEVS rebates, while many Cat B cars will be slapped with an additional S$5,000 in CEVS surcharges.

Cat B is currently S$76,612 and Mr Wong said that the increase in Cat E COEs should also help it to soften.

He added: "So Cat B could possibly fall to about S$70,000."

Whatever the price movements over the next three months, subsequent quotas will continue to be substantial because there are more than 50,000 Cat A cars and between 31,000 and 45,000 Cat B cars due for deregistration each year for the next four years.

According to the Land Transport Authority, there are 56,097 Cat A cars between nine and 10 years of age, as well as 31,794 Cat B cars of that vintage. Unless their owners choose not to scrap them, that means at least about 88,000 car COEs available over the next year alone.