COE supply for cars to fall in May-July period

The supply of certificates of entitlement (COEs) for cars will be lower in the May to July period, according to the latest announcement by the Land Transport Authority (LTA) on Friday (Apr 21).

For cars with engines up to 1,600cc and 130bhp, as well as for electric vehicles (EVs) with up to 110 kilowatts of power, there will be a monthly average of 932 COEs – 7.72 per cent fewer than the monthly average of 1,010 for the period of February to April.

Supply of COEs for larger and more powerful cars and EVs will be 8.26 per cent lower with a monthly average of 789, down from 860 previously. Open category COEs falls from 259 a month on average, to 248, marking a cut of 4.25 per cent.

Although Open category COEs can be used to register any type of vehicles other than motorcycles, they are almost exclusively used on larger cars. Put together, the figures mean that the supply of COEs for more powerful cars will be effectively 7.33 per cent lower for the May to July period compared to the previous three months.

COE premiums for cars have been setting new highs. At the most recent tender exercise that closed on Apr 19, the price of the Open category COE closed at S$124,501, which was the highest figure ever recorded for any type of COE.

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COE supply is determined mainly by the average number of vehicles taken off the road in the previous four quarters of the year. Fewer cars were deregistered in the past three months, reducing the quota for the respective categories in the upcoming May to August period.

There will be 59.3 per cent more commercial vehicle COEs, up from a monthly average of 86 from February to April to 137 from May to August.

For motorcycle COEs, the monthly average will be 1,085 – 16.8 per cent higher than the 929 in the February to April period.

The bid deposit for motorcycle certificates of entitlement (COE) will be raised from S$800 to S$1,500 from the next tender on May 4, as part of changes to reduce speculation that has helped to fuel rising premiums.

Secured motorcycle COEs will also have to be used within a month instead of the current three months. Otherwise, it will be returned to the pool for bidding and the deposit forfeited.

LTA’s latest measures on motorcycle COEs come after the bid deposit was raised from S$200 to S$800, and the validity period cut from six months to three in March 2022. The tweaks were announced after the COE hit S$10,000 in January 2022. This was the first time the price of motorcycle COEs went above the five-digit mark.

Besides the tight supply of motorcycle COEs, industry watchers believe speculative bidding have lead to rising premiums. Dealers could afford to secure COEs at high prices during tenders and let them lapse as the penalty for not utilising them was S$800 each.

Between January and March, 457 motorcycle COEs were allowed to lapse – nearly half of January’s supply of 880.

As buyers often also take loans from the dealers, the higher price that is a result of costlier COEs translates to higher earnings for the dealers.

At the most recent tender exercise, the motorcycle COE premium was S$12,179.

The LTA said that the latest changes were made to “improve allocative efficiency” of motorcycle COEs.

Rex Tan, president of the Singapore Motor Cycle Trade Association, said: “With the shorter validity period, motor dealers would also likely be more cautious in their bidding strategy as it becomes costlier to make mistakes.” THE STRAITS TIMES