Car COE premiums expected to rise despite bigger quota
Singapore
HIGHER demand could push certificate of entitlement (COE) premiums up on Wednesday despite the new and bigger COE quota for passenger cars. But news of the increase in COE supply does not seem to have benefited everyone in the car market, and only those manufacturers with stronger brand equity and a newer range of models are enjoying better business.
After the announcement nearly three weeks ago that the November 2014 to January 2015 COE quota will expand by 5.3 per cent, showrooms of some popular brands have been busier while others remained relatively quiet. Makes such as Mazda, Toyota, Nissan and Hyundai are understood to have seen bookings go up by as much as 100 per cent.
"The underlying demand is very strong and it will be tough for the Cat A premium to drop even though there are more COEs," said the managing director of a popular Japanese dealership. "The best-case scenario is that it will remain the same because there are now more COEs to absorb the increased demand."
Wednesday's COE bidding exercise is the first for the November 2014 to January 2015 quota, with 22.1 per cent more Category A COEs - for cars below 1,600 cc or 130 hp - compared to the previous August to October 2014 quota; 12.7 per cent extra Cat B COEs for cars above 1,600 cc and 130 hp; and a 10.3 per cent increase in open category Cat E COEs.
Two weeks ago, the Cat A premium settled at S$63,990, Cat B at S$72,002, and Cat E at S$72,201.
The managing director said that many of his recent customers were those who had been waiting on the sidelines previously.
"These are people who have given in to the reality that prices won't correct much because the number of replacement buyers is increasing with each quarter. That is why we saw a surge in the bookings after the quota announcement."
Another reason, according to a sales manager with a mid-sized Japanese dealership, is that there is still a sizeable number of back orders collected from the preceding month. "The bids may not be aggressive but they could be significant because of the total number."
Finally, the Cat A premium may either stay roughly where it is or inch up a couple of thousand dollars because of the relatively high COE rebate offered by some dealers. At Hyundai, for example, the rebate is set at S$60,000, compared with S$56,000 at Toyota. "The rebate is usually an indication of the level the dealer will bid at, so if orders have been strong, it is unlikely the Cat A COE will fall below S$60,000," said the managing director.
But while a marginal movement in Cat A is expected, a bigger increase could be in store for Cat B due to a slew of new and well-priced Cat B Japanese models, such as the Nissan Qashqai, Nissan X-Trail and Honda Odyssey.
Still, a few dealers hope that premiums would soften because many people have left or are preparing to leave for their year-end holidays.
"It is getting quieter with less people shopping around," said the general manager of a small dealership. "Hopefully, that and the larger quota will allow premiums to ease, if not today, then two or three tenders later."
