PRIVATE-HIRE cars are unlikely to be the main factor driving up certificate of entitlement (COE) prices, as they have been accounting for a lower share of COEs, Acting Transport Minister Chee Hong Tat said on Monday (Nov 6).

Addressing 11 questions from Members of Parliament (MPs) on record-high COE prices, Chee said that the government will continue its “cut-and-fill” approach – bringing forward COE quota volume from future peak supply years, to fill current troughs in supply.

Tackling theories about high COE prices, Chee said these are unlikely to be caused by foreigners or owners of multiple cars.

Over the last three quarters – February till October 2023 – foreigners won just 1 per cent of Category A COEs and 4 per cent of Category B ones.

Similarly, households with multiple cars account for less than 15 per cent of car-owning households, or 5 per cent of all households.

“Given the low proportion, demand-measures such as imposing additional taxes on foreigners or households that own multiple cars would have little effect on COE prices,” he said.

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Private-hire demand down

As for the theory that private-hire demand might have driven up COE prices, Chee noted that such demand has fallen.

Car-leasing companies – which bid for vehicles that are leased out as private-hire cars – won about 21 per cent of Category A COEs in the last three quarters, down from 27 per cent in the same period in 2022.

They won 23 per cent of Category B COEs, down slightly from 24 per cent in 2022.

“The data shows that COE prices have gone up in a period where demand from car-leasing companies has come down, so it is unlikely that they are the main factor for the increase in COE prices,” he said.

MP for Yio Chu Kang GRC Yip Hon Weng and MP for Ang Mo Kio GRC Gan Thiam Poh suggested treating private-hire cars differently for COEs.

Chee replied that there are trade-offs to this approach, as Singapore’s policy of zero vehicle population growth means that private-hire car quota would still have to come from existing passenger car categories.

It is hard to determine the exact quota needed as private-hire demand is “still evolving” and could vary from quarter to quarter, he said. Taking too much quota from passenger car categories could cause COE prices to spike further; taking too little would mean a shortage of private-hire services.

“We will study if there are further options beyond COE bidding to address the concerns with car-leasing companies, recognising that private-hire cars do travel longer distances on our roads, but they also serve an important function in providing (point-to-point) services for Singaporeans,” Chee said, without elaborating.

He noted the growing role of private-hire cars in meeting commuter demand for point-to-point trips. As at September 2023, two-thirds of such trips are provided by private-hire cars, up from three-fifths pre-Covid.

‘Cut and fill’ to stabilise prices

In the meantime, to stabilise COE prices, the government will continue to “cut-and-fill”, said Chee.

Singapore’s zero-growth approach means that fresh COE supply comes from de-registered vehicles. The number of vehicles due to be de-registered is set to spike in 2026 and 2027.

The government thus “cuts” some of this de-registered supply from future peaks, releasing it in advance to “fill” existing supply shortages.

For instance, the COE quota was increased for November 2023 to January 2024, with passenger car categories receiving around 35 per cent more quota than the previous three-month period. This is part of a total of 6,000 COEs previously announced as being brought forward.

Chee noted that the 35 per cent boost is “larger than the proportion of bids won by car-leasing companies in the last three quarters”.

The government will ensure that COE supply continues to increase in 2024, till the peak supply years in 2026 and 2027, he added.

As for MPs’ concerns about high prices for Category C COEs, used for commercial vehicles, Chee noted that their quota rose 58 per cent in the second quarter and 66 per cent in the third quarter.

With the recent quota boost, it will rise a further 65 per cent in this current quarter, he added.

Leader of the Opposition Pritam Singh asked if marginal growth for the motorcycle population could be allowed, as they take up less space than cars.

Chee replied: “It is true that motorcycles have a smaller footprint on the roads than cars. However, they can still contribute to congestion, as what we can see from the experiences of other cities.” He added that motorcycles can be used for both commercial and personal purposes, akin to private-hire cars rather than commercial vehicles. This is why the “zero-growth rate policy therefore applies to both cars and motorcycles”, he said.