S$9,000 drop in Cat A COE surprises car dealers

Singapore

REPLACEMENT buyers rejoiced on Wednesday, when the small-car category got off to a good start in 2016 - by plunging more than S$9,000 to a 41/2-year low in the first certificate of entitlement (COE) bidding exercise of the year.

Category A, for cars below 1,600cc or 130 hp, fell S$9,299 to S$45,002, but Cat B - the so-called big-car category for engines above 1,600cc and 130 hp - was flat; it slipped just S$81 to S$54,920.

On the other hand, Cat E - the open category which currently tracks Cat B - saw a more substantial reduction of S$2,412 to S$55,089.

Meanwhile, Cat C, for goods vehicles and buses, shed S$3,965 to S$42,036. Only Cat D, for motorcycles, was higher; it rose S$289 to S$6,889.

Some motor distributors said they had expected the Cat A premium to soften, but were surprised by the magnitude of the dip. They attributed it to poor demand in the past two weeks.

The sales manager of a Japanese dealership said: "Showroom traffic was not that slow, but many people are still holding back because they are waiting for COE premiums to fall further."

He added that many prospective customers, most of whom are replacement buyers with ageing cars, expect the next quota in the February-to-April 2016 period to be larger.

But Nicholas Wong, general manager of authorised Honda distributor Kah Motor, pointed out that the longer people wait, the higher prices will rise.

"There is a lot of talk about February's quota and how big it will be, so everyone is waiting. But when the tsunami comes, however big the quota is, it will not be enough."

He explained that although the next quota may expand by, for instance, 20 per cent, demand could double.

Mr Wong described Wednesday's sudden drop in the Cat A premium as "not sustainable", given the current demand situation: "It is not a realistic level. The premium will go up again before it comes down."

Looking ahead to the next bidding exercise, he foresees Cat A rising by at least a couple of thousand dollars, and perhaps even reaching the S$50,000 level.

This is due not only to renewed interest after Wednesday's drop, but also because of the Singapore Motor Show next week.

"The motor show will bring in more orders, so it is unlikely for premiums to come down," he said.