Possible deluge of used cars ahead but impact uncertain

Singapore

UBER could release as many as "3,000 to 4,000 cars" into the used market, causing some dealers and authorised distributors to panic about the impact to resale values.

Recent talk in the second-hand car market is that the ride-hailing heavyweight is selling off part of its estimated 15,000-strong fleet of private-hire cars, with some already auctioned off to dealers.

These include relatively new vehicles of about one to two years old, said Raymond Tang, managing director of Yong Lee Seng Motor, although he has not seen "a flood" of these newer used cars.

"I have not come across many but they have been available since July," said Mr Tang, referring to the July 1, 2017 deadline, which required private-hire car drivers to obtain a vocational licence.

After the new rules kicked in, a lot of cars were returned, said Neo Nam Heng, chairman of the Prime group of companies.

"If all these cars flow into the secondary market, the industry will face a big challenge," added Mr Neo. "Worse, because the COE premium has collapsed, it will add to the price pressure."

The premium for a Category A - for small cars - certificate of entitlement dropped to S$36,001 last Wednesday, down nearly S$7,000 from the preceding bidding exercise, or a seven-year low.

However, the impact on resale values and even new car prices may be mitigated by the high mileage that private-hire cars typically log.

The sales manager for an authorised distributor of Japanese cars said that on average, a one-year-old car depreciates by 20 per cent.

"But if the mileage is higher, then the minimum depreciation is 30 to 35 per cent," said the sales manager, asking not to be named.

According to him, most passenger cars in Singapore have an annual mileage of about 20,000 km. However, some of the one-year private-hire cars he has seen can hit double or even triple that.

"It's a trade-off. The high mileage will bring down the car's value, so ultimately, anyone who buys it is going on price alone," he said.

But another sales manager is not convinced that the residual value of similar models will be hurt.

"The private-hire cars have lower specifications than the cars sold to retail customers, they are more basic," he said.

For example, there is no bodykit or alloy wheels, while the cabin makes do without leather seats or a touchscreen.

He added: "There is a noticeable difference. Anyway, it's a mass market model. It may not have much effect on the brand."

Some of the popular models in the Uber fleet are the Honda Vezel, Mazda3, Toyota Prius, Mitsubishi Attrage and Toyota Corolla Altis. When the private-hire company first entered the Singapore market about two years ago, it operated older cars that were closer to the end of their 10-year COE lifespans.

But due to higher maintenance costs for these ageing rides, and customers' preference for newer vehicles, it turned to new cars, which resulted in COE premiums staying buoyant.

According to the industry though, the company has recently begun slowing down on its fleet expansion.