Changes to Singapore’s vehicle population and COE system: What’s the long-term vision?
AFTER earlier reluctance, the Ministry of Transport (MOT) is now open to reviewing two ideas with major implications for drivers: a one-off increase in the vehicle population alongside higher usage-based charges, and a separate Certificate of Entitlement (COE) category for private-hire cars (PHCs).
Both ideas have been raised repeatedly by Members of Parliament in the name of lowering COE prices to make cars more affordable.
But without more details, it is far from obvious how these changes might pan out.
In both issues, MOT has stressed the need to carefully study the trade-offs. These will need to be spelled out, along with an explanation of how measures fit into a larger policy strategy.
Such – or any – major changes should be backed by clarity in intent, and made in consultation with the industry.
Not a long-term solution
Explicit clarity is needed because, on the face of it, there is no long-term structural policy reason for a one-time increase in vehicle population.
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The one-off increase will likely be for passenger cars, as the goods-vehicle population is already allowed to rise by 0.25 per cent a year. But this would mean a temporary relaxation in the zero-growth policy for cars and motorcycles; the policy was introduced in 2018 to control congestion and will be in force until 2025.
MPs have called for this increase to reduce COE prices. But if this is the aim, it will be effective only in reducing COE prices for a period.
This is because COE supply at any given point is not simply determined by the total vehicle population. The recent surge in COE prices arose from low supply during the 10-year cycle, coupled with strong demand, including that from PHC fleets.
In any case, the government is already raising supply to moderate COE prices, with the cut-and-fill approach of bringing forward guaranteed deregistrations. Supply is also expected to rise in the next two to three years, as more older cars are deregistered.
Why, then, is a one-off increase still needed? Might it be used to create a separate COE category for PHCs?
After all, this could help tackle a trade-off that the government has repeatedly raised: To create a PHC COE category, quota would need to be taken from passenger car categories.
Consider the worst-case scenario if quota is reassigned without any injection:
With a diminished supply, passenger car COE prices would remain high despite the quota increase from deregistrations. With many drivers priced out of car ownership, demand for PHCs would go up. Larger PHC players can afford to bid aggressively, keeping PHC COE prices high and pushing smaller operators out of the market.
With PHCs on the road more often than passenger cars, road pricing would need to rise to curb congestion – pushing up the price of point-to-point (P2P) rides.
Could a one-off injection limit the extent of quota reassignment, potentially avoiding this scenario? This could happen if the new category is sufficient for existing PHCs – but it raises the question of the optimal size of the PHC population.
This and other questions must be answered. Clear policy goals, backed by timely consultations with the industry, would make it easier to correct problems before they create a worst-case scenario like the one above.
Concentrate and ask again
To start, if there is to be a separate COE category, we need a clearer definition of PHCs and their roles.
If, for instance, a PHC is defined as a privately-owned vehicle serving commercial transport purposes, then the extent should be specified: a minimum frequency of commercial trips or distance covered, say.
As Associate Professor Raymond Ong from the National University of Singapore Department of Civil and Environmental Engineering notes: “A separate COE category for PHCs requires a lot of thought, because how do we categorise a PHC when we are really talking about the use of the vehicle, rather than a specific type of vehicle?”
The bigger question, again, is the long-term policy intent of a separate COE category.
Walter Theseira, an associate professor of economics at the Singapore University of Social Sciences, asks: “Is it to have the ‘correct’ number of PHCs? Is it to make the playing field fair on cost between taxi and PHC? Is it to bring down COE prices for private cars?
“To my mind, the issue is that the COE isn’t really the best tool for dealing with differences in use of vehicles.”
The policy intent must be made clear, and the execution needs to be shaped at an industry-wide level, involving consultation with the public, P2P operators, PHC fleet owners, and other relevant parties.
LTA has regular meetings with industry groups such as Motor Traders Association of Singapore and National Taxi Association and is in the midst of a P2P sector review.
But the last public consultation on changes to the COE system was in 2013 – coincidentally the same year ride-hailing began here, with Uber’s debut.
“The engagement process between LTA and the stakeholders should be comprehensive and start early, even if we know the changes are not likely for some years,” said Prof Theseira.
After all, industry consultations could have helped avoid the recent COE spike and the glut of PHCs. By 2017, it was already clear that not only were PHCs here to stay, they were displacing taxis. ComfortDelGro’s then-group chief executive Yang Ban Seng blamed ride-hailing apps for eating into the company’s bottom line.
That was also a bumper year for new car registrations, with 91,922 the highest figure in the decade spanning 2013 to 2023. Any automotive executive could have predicted that the cycle would lead to today’s COE supply doldrums.
High stakes
Without further details – not least about the scale of the one-off injection – it is hard to predict the outcome of the changes being mulled. Still, we can also consider a best-case scenario:
With a separate COE category, PHCs no longer bid in competition with passenger cars, relieving price pressures in those categories.
The COE supply – already on track to increase with deregistrations – is boosted by the one-off increase. COE prices for passenger cars and PHCs moderate, and usage-based road pricing for vehicles is able to control congestion effectively.
To achieve this, the authorities would need to ensure the road-pricing scheme actually changes driver behaviour, and balance road usage carefully among vehicle types.
For instance, during rush hour, what mix of private cars and PHCs would be optimal? What about vehicle occupancy rates? The answers to such questions, again, depend on the ultimate policy goals.
Said NUS’ Prof Ong: “The question is equity – is it fair or not? And how to make it fair for everyone. To be very honest, I think that no matter what we look at, we will not be able to please everyone.”
For Prof Theseira, the upcoming changes could be a springboard to looking at transport policy in general, too.
“For some time, it’s been worth having a clearer discussion about the goals of the COE or land transport pricing system, what can or cannot be achieved by it and what the bigger implications are,” he noted. “It’s about pushing the trade-off between the benefit of vehicle use for our economy and society, versus the harms caused by congestion and to the environment.”
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