Motor distributors gearing up for COE boom

[SINGAPORE] Motor distributors are gearing up their operations for a boom in certificates of entitlement (COEs) next year, including one brand which has returned to the prime Leng Kee Road motor belt.

With a maximum of about 52,000 cars which can be deregistered between now and mid-2015, dealers are preparing for a big spike in COE supply within the next year. Deregistrations are the main component in determining each new COE quota and over the past four years, the number of cars scrapped has been low. This, and a lower allowable vehicle growth rate and COE clawbacks due to previous oversupply, have put a squeeze on COEs.

As a result, the number of private passenger cars registered in 2013 was just 22,008 units, while only 27,000-plus new cars were put on the roads in each of the preceding two years.

"Compared with those lean years, 2015 will have at least 50 per cent more car COEs, if not 75 per cent more,'' says the director of a volume dealership.

The situation looks even rosier beyond that. According to the Land Transport Authority, from mid-2015 to mid-2016, a maximum of 107,000 cars are due for deregistration, or double the preceding period's figure. And this pool remains about the same size for the following 12-month period from mid-2016 to mid-2017.

So it is no surprise that many distributors are ramping up operations. The Mitsubishi brand, for example, is returning to Cycle & Carriage's Alexandra Road showroom.

In 2010, Mitsubishi shrank its operations in line with the contracting market. To cut costs, it operated out of only one showroom by its dealer in Ubi.

But this week, it re-opened its main showroom in the prime motor belt.

"In the past, when volume was low, we did not need to spread out so much,'' says a senior executive." But with the market likely to pick up momentum over the next two years, we can better capture demand with showrooms in both car belts.''

Some brands are expanding their model line-up. For Opel and Chevrolet, distributor Alpine is bringing in two new models each. The first, the Chevrolet Sonic hatchback, arrives next month, to complement a total of 11 existing models.

The four cars will be Alpine's first new model launches in two years.

But others may be more cautious about over-extending themselves. Over at Borneo Motors Singapore, the authorised Toyota distributor is said to be streamlining its pre-delivery inspection (PDI) operations and securing new facilities to handle the expected rise in sales. Distributors require PDI facilities to prepare new cars for delivery.

But it appears investment in other areas may take place only when the actual boom materialises.

The director of a luxury dealership believes focusing on PDI is "important to prepare for what we believe will be explosive growth ahead'', with one concern being the ability to rent sufficient space for PDI and storage when sales increase.

But he adds that a more critical issue is manpower, especially trained sales staff.

"In the past three years, many sales people left the industry or were retrenched because of falling sales,'' he says. "The attrition rate was at least 30 to 40 per cent for the major dealerships.''

Distributors also cut down on sub-contract work for everything from accessories to vehicle logistics.

The director says: "Many of these sub-contractors have either scaled down tremendously or gone bust. Whether we can get back all these when we need them fast will be key.''