COEs end the year mostly higher in final lap of sales race

[SINGAPORE] Certificate of entitlement (COE) premiums ended mostly higher in the last tender of 2020 on Wednesday as motor traders made a last ditch effort to shore up sales in a year of pandemic and pared down supply.

But on average, this year's main car premium was only slightly higher than last year's, despite the supply of certificates being 25 per cent smaller. Compared with the average in 1999, which had a similar quota size, this year's average premium was appreciably lower.

At the close of Wednesday's tender, the COE for cars up to 1,600cc and 130bhp finished at S$40,556, a tad lower than the previous S$40,714. The COE for cars above 1,600cc or 130bhp closed at S$49,300, up from S$45,012.

Open COE, which can be used for any vehicle type except motorcycles but which ends up mostly for bigger cars, rose similarly to S$49,500, from S$45,510.

The commercial vehicle COE finished at S$35,201, up from S$32,889. The motorcycle premium closed at S$7,689, up slightly from S$7,670.

COE supply is determined largely by the number of vehicles scrapped in a particular year. And the number of cars being scrapped each year is influenced by the number of new cars registered 10 years earlier (as COEs have a statutory lifespan of 10 years).

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Industry players expect the 2021 COE supply to be either unchanged or slightly larger despite the number of new cars registered 10 years ago, in 2011, being 33 per cent fewer than in 2010.

This is because the shortfall will be made up by some 22,000 cars which had their COEs revalidated for five years in 2016. They will have to be scrapped in 2021.

The unknown is the number of motorists who will revalidate their car COEs in the next 12 months. These revalidated COEs will not contribute to 2021's quota.

Hence if consumer sentiment and market conditions remain unchanged, prices next year are likely to soften.

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