COE premiums fall ahead of new quota

[SINGAPORE] COE (Certificate of Entitlement) premiums tumbled yesterday in anticipation of next month's new bigger quota. A COE in Category C - for goods vehicles - plunged $16,613 or a hefty 33.6 per cent to $32,890.

Also lower was the Cat A premium for cars below 1,600cc and 130 hp: It fell $6,065 to $71,335. Cat B - for cars above 1,600cc or 130 hp - shed a more substantial $9,494 to $75,010, while Cat E - the open category which currently tracks Cat B - dropped $10,290 to $73,810.

Only Cat D - for motorcycles - inched up $13 to a record $4,502 as dealers rushed to clear stocks ahead of October's new Euro 3 emission standard.

"I knew premiums would adjust downwards but I didn't expect them to drop by this much," said the sales manager of a luxury dealership.

Commercial vehicle COE premiums have also softened because of the enhanced incentives to owners of old diesel commercial vehicles under the Early Turnover Scheme. This has also caused dealers to run out of stock and together with the prospect of a 46.9 per cent jump in Cat C COEs to 770 monthly, the premium's slide was accelerated.

Overall, the new COE quota from May-July 2014 will have 32.1 per cent more COEs than the February-April 2014 quota. Specifically, there will be 41 per cent more Cat A COEs or 1,011 each month, 37.8 per cent more Cat B COEs or 966 monthly, and 53.4 per cent Cat E COEs or 586 monthly.

As a result, many prospective buyers have been holding back on their purchases.

"Everyone is waiting for the new quota to kick in," said the managing director of a luxury dealership. "Very few want to commit now, and those who do commit will only do so at a lower price."

He added that a "lower price" also means that distributors have to bid less for a COE in future.

Over the past two weeks, several luxury dealers have been cutting prices and increasing COE rebates - some to as high as $80,000 - to woo customers.

Many of the Japanese volume distributors have also dropped prices. This will lead to lower COE bids in future, noted the managing director.

"I believe prices will continue to slide because it will be self-fulfilling prophecy," he said.

But the head of a rival luxury dealership disagrees and expects the dip in the big car COE premium to be temporary.

"What happens when COE falls? Dealers have to drop their prices and when they do, people will start returning to the showrooms," he said.

Pointing to a survey last week which showed nearly 50 per cent of people polled plan to buy a car in the next two years, he cites pent-up demand as a big factor in keeping COE premiums buoyant.

"Most showrooms over the last two weekends were quiet because people were waiting for prices to fall before they buy. We will have to see what happens this weekend but I am sure the crowds will be back," he said.

But he added that a more important gauge is the actual increase in COEs from next month onwards.

"In percentage terms, it sounds like a nice big figure. But in actual numbers, it is 265 more COEs for Cat B and 204 for Cat E per month, or less than 500. If each distributor takes just an extra 20 to 30 orders, that will be enough to negate any increase."