CERTIFICATE of entitlement (COE) prices for November’s first round of bidding fell across the board after news of a COE quota increase, with a dramatic drop of S$40,000 for the category reserved for larger, more powerful cars.

Prices for Category B fell 26.7 per cent or S$40,000 to S$110,001. Category B is for cars with engines of more than 1,600 cubic centimetres (cc) in capacity or with more than 97 kW of power, or for EVs with more than 110 kW.

Category E, the open category which can be used to register any type of motor vehicle except for motorcycles, decreased by 20.9 per cent or S$32,992 to S$125,011.

Category E is typically used to register Category B cars, the most expensive COE category.

The price for Category A, for mainstream cars, fell 9.7 per cent or S$10,311 to S$95,689.

The Category A COE applies to mainstream cars with engines up to 1,600 cc in capacity or with under 97 kilowatts (kW) of power, or for electric vehicles (EVs) with less than 110 kW.

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COE prices have consistently broken records in recent months, but on Nov 3, the Land Transport Authority (LTA) announced an additional 1,614 COEs for cars and commercial vehicles, bringing the total number for the period November 2023 to January 2024 to 14,388.

It means 35 per cent more quota for the two passenger car categories, A and B, compared to the preceding three-month period.

In the latest tender, prices for Category C, applicable to commercial vehicles and buses, fell 8 per cent or S$6,789 to S$78,001.

Prices for Category D, used for motorcycles, decreased 2.8 per cent, or S$312, to S$10,889.

Price drop ‘beyond expectations’ 

Industry observers The Business Times spoke to said the significant 35 per cent increase in quota for categories A and B were the obvious reason for the drop in prices, but they were surprised by the magnitude of the fall in Category B.

“I don’t think anyone in the industry expected it to fall by this much,” said Nicholas Wong, the general manager of Honda distributor Kah Motor.

“The pullback has been beyond my expectations,” said Ron Lim, head of sales and marketing at Nissan distributor Tan Chong Motor. He had expected, at most, a reduction of around S$10,000 across the categories.

It took multiple increases in the quota to arrive at this stage, said Kah Motor’s Wong, who noted that the LTA first increased the quota in October. It then announced a new, larger quota for the November 2023-to-January 2024 period, and bumped up the quota again with the announcement on Nov 3.

The moves are part of the LTA’s “cut and fill” policy to bring more COEs from peak periods to fill in the relatively low quota now experienced.

Wong added: “Category B didn’t get that much of an addition to the quota up until the last announcement. If you look at the latest adjustment, in absolute numbers, Category B has finally received a lot more quota.”

A market correction?

But several observers agreed that this market correction is more reflective of actual retail demand.

Wong noted that 2022 and 2023 have a similar total number of passenger car COEs – around 29,000 – and that the average prices in 2022 (S$75,000 for Category A and S$95,000 for Category B) were more realistic.

“There was definitely a bubble building,” he said, referring to the past three months’ COE prices.

Tan Chong Motor’s Lim said: “I think in the past three months, the COE price skyrocketed much too quickly. We are back at the price level of around S$110,000 for Category B (from July), which is what I think the price would be if not for all the push factors.”

The tightening of emissions regulations, coupled with the reduction in the rebates offered under the Vehicular Emissions Scheme (VES), both of which come into effect in 2024, has been cited as one of the reasons for COE price pressure. (The VES grades cars into bands, depending on how much they pollute, and hands out penalties or rebates accordingly.)

Eddie Loo, managing director of the CarTimes Group, said: “This is the market correcting itself. The retail market has been weak, a lot of people went travelling, and our walk-in numbers have dropped. The buying sentiment has not been fantastic.”

But Lim of Tan Chong Motors cautions that price pressures remain for the rest of 2023, and that COE prices could swing either way in the next round of bidding because of numerous competing factors.

Because of tighter VES rules, some car buyers may be up against a price increase of S$10,000 to S$15,000 at the start of 2024, he said.

However, the race to register a car before 2024 is also dependent on the stock of those cars.

“It’s not just a demand issue, but also a supply one at this point, and it may also vary from model to model. We’ll just have to see how buyers respond in showrooms this coming weekend,” he said.