The COE brake on car sales
Record COE prices have cut the affordability of mass market cars. Here are some models currently offered at razor-thin margins, or even losses if operating costs are included
With Certificate of Entitlement (COE) premiums continuously breaking records at pretty much every bidding round, even the cheapest, smallest car models are looking increasingly unaffordable.
Couple this with impending changes from the Land Transport Authority (LTA) on how vehicle emissions will be measured, as well as pullbacks of emissions scheme rebates, the future looks bleak for some car dealers.
To clear the stock of cars which will be affected by the regulatory changes, some dealers appear to have started aggressive mark-downs – by as much as 15 per cent from their original recommended retail prices – at the recent Car Expo held over the Oct 14-15 weekend.
One mainstream car dealer at the Car Expo told BT that he’s projecting mainstream car prices to go up by at least S$10,000 next year.
“High COE prices impact mainstream brand sales negatively, so we have to offer prices that deliver sales,” he said. “If you look at the price increases on the horizon for 2024 because of the VES (Vehicle Emission Schemes) and emissions regulations, we don’t really have a choice.”
Apart from the advertised prices, the figures below are pulled from LTA listings of new cars registered in August and September, which don’t show the actual prices they were transacted at – so for all intents and purposes, it’s possible the real profit margins dealers earned are even less than what’s presented here.
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Automobile industry consultant Say Kwee Neng told BT that smaller cars may actually yield nett losses after overheads are factored. He added that some companies will have to rely on other operations to cushion their car sales business, like after-sales service and parts.
Here are five mass-market models – all Category A COE cars – offered at the recent Car Expo with razor-thin margins. The gross profit margins do not include operating costs like:
- storage of the car when it first arrives in Singapore;
- the pre-delivery inspection and clean-up of the car; and
- further discounts from bargaining or a trade-in of the buyer’s previous car.
1. Citroen C4 Feel
Advertised at Oct 2023 Car Expo for: S$143,999 with COE Recommended retail price: S$150,999 (4.6 per cent higher)
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Total basic cost without COE: S$32,737 Total basic cost with COE from the first round of bidding in October 2023 (S$104,000): S$136,737 Gross margin: S$7,262 (5.31 per cent over total cost with COE).
If the COE was purchased in the second October round of bidding, because the Car Expo took place in between the two rounds: Total basic cost with COE from the second round of bidding in October 2023 (S$106,000): S$138,737 Gross margin: S$5,262 (3.79 per cent over total cost with COE).
2. Kia Cerato SX
Advertised at Oct 2023 Car Expo for: S$148,999 with COE Recommended retail price: S$150,999 (1.3 per cent higher)
Total basic cost without COE: S$30,005 Total basic cost with COE from the first round of bidding in October 2023 (S$104,000): S$134,005 Gross margin: S$14,994 (11.19 per cent over total cost with COE).
If the COE was purchased in the second October round of bidding, because the Car Expo took place in between the two rounds: Total basic cost with COE from the second round of bidding in October 2023 (S$106,000): S$136,005 Gross Margin: S$12,994 (9.55 per cent over total cost with COE).
3. Mazda 3 1.5 Classic
Advertised at Oct 2023 Car Expo for: S$146,999 with COE Recommended retail price: S$172,888 (15 per cent higher)
Total basic cost without COE: S$25,356 Total basic cost with COE from the first round of bidding in October 2023 (S$104,000): S$129,356 Gross margin: S$17,643 (15.19 per cent over total cost with COE).
If the COE was purchased in the second October round of bidding, because the Car Expo took place in between the two rounds: Total basic cost with COE from the second round of bidding in October 2023 (S$106,000): S$131,356 Gross margin: S$15,643 (13.43 per cent over total cost with COE).
4. Suzuki Swift 1.2
Advertised at Oct 2023 Car Expo for: S$136,888 with COE Recommended retail price: S$136,888
Total basic cost without COE: S$21,984 Total basic cost with COE from the first round of bidding in October 2023 (S$104,000): S$125,984 Gross margin: S$10,904 (8.66 per cent over total cost with COE).
If the COE was purchased in the second October round of bidding, because the Car Expo took place in between the two rounds: Total basic cost with COE from the second round of bidding in October 2023 (S$106,000): S$127,984 Gross margin: S$8,904 (6.96 per cent over total cost with COE).
5. Peugeot 3008 1.2 eat8 Active Premium
Advertised at Oct 2023 Car Expo for: S$173,000 with COE Recommended retail price: S$178,888
Total basic cost without COE: S$60,047 Total basic cost with COE from the first round of bidding in October 2023 (S$104,000): S$164,047 Gross margin: S$8,953 (5.46 per cent over total cost with COE).
If the COE was purchased in the second October round of bidding, because the Car Expo took place in between the two rounds: Total basic cost with COE from the second round of bidding in October 2023 (S$106,000): S$166,047 Gross margin: S$6,953 (4.19 per cent over total cost with COE).
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