Category A COE premiums could rise but not for the reason you think

By Leow Ju-Len

Could lithium-ion batteries give the certificate of entitlement (COE) market a jolt on May 6? A new rule designed to make some electric vehicles (EVs) more affordable came into effect this month, potentially intensifying competition for Category A (Cat A) COEs.

Until now, the category was for cars with less than 1.6 litres of engine capacity and less than 97 kilowatts of power. That second threshold was raised to 110 kW for EVs, in order to make a wider range of them available in Cat A, where COE premiums are typically lower. At the last COE auction in April, for example, the Category B certificate (for cars with more than 1.6 litres under the bonnet) cost S$90,002, or S$21,303 more than the Cat A certificate.

The new rule reclassified mass-market EVs such as the MG ZS EV (a sport utility vehicle from China that was once Singapore’s single best-selling electric car) and the Hyundai Kona Electric and Ioniq Electric (two battery-powered hatchbacks) from Cat B to A.

Some dealers responded to the reclassification by trimming EV prices as early as March, in the immediate aftermath of the new rule’s announcement. Yet, industry players told The Business Times that they don’t expect a flood of EV buyers to push Cat A prices up when the month’s first COE auction ends on May 6.

That’s one view put forward by Ron Lim, the head of sales and marketing at Tan Chong Motor Sales, whose all-electric Nissan Leaf is one car that the new classification is precisely intended to benefit. “At the end of the day, the number of EVs that can qualify for Category A is only a handful,” he said.

Other dealers expect the widened range of EVs in Cat A to have less impact on May 6’s COE auction than the broader factors of overall demand and supply.

Something that could ease pressure on prices, for instance, is the fact that there are more Cat A certificates available for the next 3 months than in the February-to-April period: 1,224 a month on average, instead of 1,062.

“I doubt any pre-orders collected for the newly reclassified Cat A models alone will be enough to push up the premium, especially in the face of more Cat A COEs being released,” Lim said.

Other developments could drive the certificate’s premium up instead. In April, E-Auto, a Sime Darby subsidiary, said it had sold 500 units of the BYD e6 to a fleet company that specialises in zero emissions vehicles. To deliver them all, the company will need to accumulate COEs, but the e6 was already in Cat A before the new rules kicked in, so its healthy fleet sales will have bolstered demand for some time now, instead of causing it to spike this month.

Another reason Cat A could rise, along with the rest of the market, is that April saw an unexpected drop in premiums. A fortnight ago the Cat A and B certificates fell by S$4,297 and S$8,387 respectively, enough to light a fire under some buyers who saw the fall as a chance to grab a COE while the market took a breather from what seemed like an inexorable climb.

“We had quite a bit of interest after that,” one senior marketing manager for a multi-brand franchise said. A sales manager said: “We’ve seen better sales in general. That might lead to more pressure (on prices).”

If April’s fall in prices causes a rebound this week, it will be business as usual for a market that has been rising for months. Newly reclassified EVs might mean there are new players in the Cat A game, but the basic rules remain the same.