S$10,000 may be a new normal for motorcycle COEs

IT MAY take a few more months before the full effects of changes to the bidding rules for motorcycle Certificates of Entitlement (COEs) become clear, but early indicators are that prices are likely to cling closer to S$10,000 than S$5,000.

One reason: Motorcycles are now an important means of income generation.

When the new rules kicked off in May’s first round of COE bidding, prices of the Category D COE, for motorcycles, plummeted 59 per cent to S$5,002 from S$12,179 the previous round.

The price spiked back up in May’s second round of bidding, though, to S$10,602. It rose again slightly to S$11,001 in June’s first round of COE bidding.

The record high for Cat D COE is S$13,149, recorded in November 2022’s first round of bidding.

The Land Transport Authority (LTA) had in April increased the deposit required to make a bid for Category D COEs, which are used for motorcycles, to S$1,500 from S$800. LTA also reduced the validity of temporary COEs (TCOEs) to one month, from three.

TCOEs are given to winning COE bidders and must be used to register a vehicle before they expire.

In a press release dated Apr 21, LTA said that 457 Category D TCOEs had expired without being used. Changes to the system were thus made “to improve allocative efficiency”.

Motorcycle industry representatives The Business Times spoke to said these measures would help reduce Category D COE profiteering or speculative bidding.  

This is because dealers may hoard COEs previously secured at lower prices, then artificially inflate the latest COE price with higher bids.

As motorcycles are sold in a package combining the cost of the vehicle and the COE, dealers can secure profit by charging customers the higher current COE while using previously secured, cheaper COEs to register bikes.

Rex Tan, president of the Singapore Motor Cycle Trade Association, said the rule changes may “reconnect” Category D COE prices to actual demand, but it may take “three to four months to see if the measures are truly effective”.

Tan said he was “shocked” at May’s price drop to S$5,002. “I think the sudden change had dealers spooked, and also they needed time to adjust their business models,” he told The Business Times.

The abnormally low COE price in May drove demand for motorcycles. When COE prices are at elevated levels, even small dips can push buyers to enter the market. Indeed, increased demand was reflected in the number of bids. An average of 1,027 bids were received in each of the last three rounds of COE bidding, an 80 per cent increase over the 571 average bids per round from January to April 2023.

“When the COE dropped, a lot of people came to showrooms to buy,” said the sales manager of a multi-brand motorcycle dealership. “The prices you are seeing now are a result of a big backlog of orders collected since then.”

Dealers, too, jumped at the opportunity to get a cheaper COE. “They grabbed the S$5,000 COE to clear their small bikes, and that helped push it back up again,” said the manager of a European motorcycle brand.

Yet, demand is not coming solely from opportunistic buyers in search of a good deal.

Industry observers noted that the demand for cheaper, small-capacity motorcycles remains high. This is especially because food delivery services give riders the ability to fund their motorcycle purchases.

Figures from LTA indicated that in 2022, small capacity motorcycles with engines below 400 cubic centimetres made up 84 per cent of the motorcycle population here.

“Actually, the buyers of smaller bikes and those who do food delivery were very decisive. When the lower COE price came out, they were already at the shops buying the bikes,” said the manager of the multi-brand motorcycle dealership.

There was a three-week gap between the end of May’s second round of bidding (May 24) and the start of June’s first round of bidding (Jun 5), instead of the typical fortnight between rounds.

This means prices could still adjust downwards in the next round this month. COE bidding takes place every first and third Monday of each month.

“Generally, the feel is S$8,000 or so for a stable level. But this is really just guesswork as many things can change, and it’s market driven,” said Tan of the Singapore Motor Cycle Trade Association.

“I don’t think we can ever expect it to return to below S$5,000, which is what we saw before speculative bidding really affected prices, and also before food delivery services became popular,” said the European brand manager. “For now, I will be happy with a COE price of less than S$10,000 that holds stable. That’s best for business.”