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New cars on the road likely to double this year

Distributors are gearing up for another bumper ride in 2016 even as the economy slows



THE year 2015 may have been a watershed in land transport for the unexpected change in cabinet ministers, as well as the entry of two foreign companies in the public bus sector. But it is safe to say that most people were equally focused, if not more so, on the expanding COE supply.

After five years of contracting quotas, the COE taps were slowly opened again a year ago. In fact, there were four successive increases in COE quotas until the marginal dip in the current period.

So much so that total new cars to be put on the road in 2015 is expected to be close to twice that in 2014, while available COEs for passenger cars will be more than double.

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In 2014, a total of 28,932 cars were registered. But in 2015, the final number could jump to about 57,000, up 97 per cent. At the same time, the number of COEs for Categories A (cars below 1,600 cc and 130 hp), B (cars above 1,600 cc or 130 hp) and E (the open category) add up to 60,888 for 2015. This is a 109 per cent increase from 2014's total of 29,093 COEs which can be used to register a car.

Looking to 2016, the COE supply is expected to continue growing as cars bought in the boom years of 2004-2008 continue to be deregistered and turned into recycled COEs. This is despite the 0.9 per cent contraction in the November 2015-January 2016 COE quota, which is seen as a blip on the radar. As a result, car distributors are gearing up for another bumper year even as the economy slows down.

One reason is the number of replacement buyers, says Cheah Kim Teck of Jardine Cycle & Carriage, the exclusive dealer of Mercedes-Benz, among others.

Another is the fact that a car is, like it or not, a luxury item.

"If you own a car, you are more likely to be in the upper middle income bracket, or at least through multiple sources you have income similar to that," says Mr Cheah, who is Jardine C&C's managing director of business development.

And most agree that demand will still continue to exceed supply, even in a lacklustre economy.

David Pang, sales director of the Alpine Group which deals in Opel and Chevrolet, says that buyers would merely be more price-sensitive. "Instead of a premium model, they may settle for a more modest buy."

COE premiums are also likely to soften in such a market, says Nicholas Wong, the general manger of authorised Honda distributor Kah Motor. "The slowing economy will affect the car market in terms of prices, and how much COE premiums fall depends on how severe purchasing power gets hit."

So it looks like every downturn has a silver lining, if only for car buyers.

READ MORE: Dealers see limited impact from slowdown

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