Car COE premiums down again but dealers expect rebound

Singapore

BARGAIN-HUNTING and changes to emission standards could soon push up passenger car certificate of entitlement (COE) premiums, which on Wednesday fell for the third consecutive bidding exercise.

That is the view of many market insiders as COE premiums headed south, with the small car premium plunging almost S$7,000. Category A - for cars below 1,600 cc or 130 hp - shed S$6,899 or 16 per cent to S$36,001. The last time Cat A was lower was in November 2010, or nearly seven years ago.

As for Cat B - for cars above 1,600 cc and 130 hp - the premium slipped S$2,000 to S$49,000, while Cat E - the open category which currently tracks Cat B - was down S$1,995 at S$48,005.

Meanwhile, Cat C - for goods vehicles - and Cat D - for motorcycles - were both higher. Cat C rose S$998 to S$43,002 and Cat D bounced back by S$1,890 from a 31/2-year low to S$5,402.

Nicholas Wong, general manager of authorised Honda distributor Kah Motor, had expected both Cat A and B premiums to be lower but was surprised by the size of the former's adjustment.

"Perhaps many distributors are out of stock because of Euro 6, so demand is lower due to the longer waiting time," said Mr Wong, referring to the new and more stringent emissions standard which came into effect on Sept 1. "Prior to September, the clearing of stocks had led to an unsustainable increase in premiums. They are now at a more comfortable level."

He added that private-hire companies were also out of the bidding process, thereby taking upward pressure off premiums.

But Mr Wong sees this only as "temporary relief" because he forecasts higher premiums ahead. "The current situation is due to Euro 6. The next change is Jan 1, when most cars will lose their CEVS rebates under VES. Those who are aware will come in to buy and register before end-December, thus pushing COE premiums up."

The current CEVS or Carbon Emissions-based Vehicle System will be replaced by the more stringent VES or Vehicle Emissions Scheme on Jan 1, 2018.

A car such as the Honda Civic 1.5 Turbo, for example, currently enjoying a S$5,000 CEVS rebate, will slip into the neutral band because of the tightened carbon dioxide limit under VES, thereby raising its sticker price.

Ron Lim, general manager of authorised Nissan distributor Tan Chong Motor Sales, expects the lower Cat A premium to "re-ignite buying interest".

He said that various factors were responsible for the drop, such as a shrunken backlog of orders after dealers were done clearing pre-Euro 6 stock, and the news of a large supply of private-hire cars being released into the used market.

"It is also probably a reflection of private-hire companies being absent from COE bidding as they slow down their fleet expansion," added Mr Lim. "But generally, given the economic situation, sentiment is not strong, so no one is chasing prices."

As for models that have been discontinued because of the new emission rules and whether this would impact COE premiums, he doubts it because "they may have been popular once but they are not currently".

Mr Lim explained: "There may be other considerations for discontinuing some models, such as changing trends. Anyway, a few are only unavailable temporarily."

He said that people would buy if the price of an attractive model is right, for example, the new Nissan Qashqai crossover.

As for the jump in the motorcycle premium, the over S$2,000 drop two weeks ago had led to a spike in demand for commuter bikes, said Anthony Tan, owner of Ideal Motoring.

These are the smallest Class 2B models, used mainly for basic transportation and by couriers and deliverymen, for example.

"A 150cc Yamaha or Honda model that used to be about S$14,000 became about S$11,000. There was a big rush," said Mr Tan.