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COE supply to shrink further in new year
By Christopher Tan, Senior Correspondent
CAR prices, which have risen by $20,000 to $30,000 in the last year, are poised to go even higher in the coming months.
This is because the supply of certificates of entitlement (COEs) is expected to shrink again when the next quota kicks in come February - the sixth consecutive annual contraction.
In fact, calculations by The Straits Times indicate that supply could fall below 40,000 pieces for the new year, which would make it the lowest since the COE system started in 1990.
This is the result of two factors. First, the supply of COEs is largely determined by the number of cars deregistered, but spiralling COE prices are dissuading more motorists from scrapping their old cars and buying new ones.
Secondly, the Government has halved the allowable growth rate of the car population in Singapore.
Mr Koh Ching Hong, the managing director of Toyota distributor Borneo Motors, described it as a 'scary' prospect.
'This is going to hurt - a lot,' he said, referring to how the crunch will impact the motor industry.
The smallest COE supply thus far was in 1996, when 40,710 were released. Last year's pool numbered 77,000; this year's shrank to 48,000, sending COE premiums to between $39,000 and $49,000.
As an indication of how COE premiums affect vehicle prices, the cost of a popular car like the Toyota Corolla Altis 1.6 shot up to $89,488 this year, up from $67,988 a year ago. An Audi A4 1.8 rose from $140,200 to $170,200.
This year's lofty premiums have also nudged budget cars, such as those from China, right off the market, when the cost of the COE surpassed that of the vehicles themselves.
With the coming supply contraction, observers estimate premiums will hit $60,000 by the second half of next year.
Mr Andre Roy, the group managing director of multi-brand Wearnes Automotive, said: 'If you just go back in history, when quotas were around 40,000 to 45,000, COE prices were around $60,000 to $70,000.'
But luxury cars will continue to thrive in such a market, he said.
The motor industry at large, which has been downsizing in the last year or so, is bracing itself for an even leaner year.
Motor Traders Association (MTA) president Teo Hock Seng said: 'The writing is on the wall. Everybody will have to trim down further.'
He also expects car prices to rise, unless the COE supply starts expanding again, which many believe will happen from 2012. This is because there was a surge of new car registrations between 2004 and 2006. These vehicles would be old enough to be scrapped.
But Mr Roy of Wearnes said he is not so optimistic, because high car prices will just persuade more car owners to hang on to their existing vehicles.
This will crimp COE supply, which is determined mainly by the number of vehicles taken off the road. Already, deregistration has slowed substantially this year. Between July and October, 12,928 vehicles were deregistered - either scrapped or re-exported - 23 per cent down from the 16,766 in the corresponding months last year.
Besides deregistrations, the COE supply is also pegged to an allowable annual growth rate of the vehicle population, which was halved last year to 1.5 per cent. In September, Senior Minister Goh Chok Tong even suggested that it should go to zero, to curb road congestion.
The MTA has meanwhile lodged an appeal with the Land Transport Authority over the dwindling COE supply.
Industry watchers are not holding their breath for relief measures.
Mr John Rachmat, a transport analyst with Royal Bank of Scotland Asia Securities, sees the COE supply trend as 'a renewed supply-side push' to get people to use public transport.
He said: 'Generally speaking, such a move will bring the best result if there's an accompanying push for better service by public transport operators.'
Associate Professor Anthony Chin, who specialises in transport economics at the National University of Singapore, said the limited COE supply will bring the Government closer to its aim of managing road congestion.
'This, of course, helps to facilitate movement of goods and people and that's good for the economy,' he said.
However, it also means many people below a certain income level will not be able to own a car.
'But this is a market reality,' he said.
[email protected]
By Christopher Tan, Senior Correspondent
CAR prices, which have risen by $20,000 to $30,000 in the last year, are poised to go even higher in the coming months.
This is because the supply of certificates of entitlement (COEs) is expected to shrink again when the next quota kicks in come February - the sixth consecutive annual contraction.
In fact, calculations by The Straits Times indicate that supply could fall below 40,000 pieces for the new year, which would make it the lowest since the COE system started in 1990.
This is the result of two factors. First, the supply of COEs is largely determined by the number of cars deregistered, but spiralling COE prices are dissuading more motorists from scrapping their old cars and buying new ones.
Secondly, the Government has halved the allowable growth rate of the car population in Singapore.
Mr Koh Ching Hong, the managing director of Toyota distributor Borneo Motors, described it as a 'scary' prospect.
'This is going to hurt - a lot,' he said, referring to how the crunch will impact the motor industry.
The smallest COE supply thus far was in 1996, when 40,710 were released. Last year's pool numbered 77,000; this year's shrank to 48,000, sending COE premiums to between $39,000 and $49,000.
As an indication of how COE premiums affect vehicle prices, the cost of a popular car like the Toyota Corolla Altis 1.6 shot up to $89,488 this year, up from $67,988 a year ago. An Audi A4 1.8 rose from $140,200 to $170,200.
This year's lofty premiums have also nudged budget cars, such as those from China, right off the market, when the cost of the COE surpassed that of the vehicles themselves.
With the coming supply contraction, observers estimate premiums will hit $60,000 by the second half of next year.
Mr Andre Roy, the group managing director of multi-brand Wearnes Automotive, said: 'If you just go back in history, when quotas were around 40,000 to 45,000, COE prices were around $60,000 to $70,000.'
But luxury cars will continue to thrive in such a market, he said.
The motor industry at large, which has been downsizing in the last year or so, is bracing itself for an even leaner year.
Motor Traders Association (MTA) president Teo Hock Seng said: 'The writing is on the wall. Everybody will have to trim down further.'
He also expects car prices to rise, unless the COE supply starts expanding again, which many believe will happen from 2012. This is because there was a surge of new car registrations between 2004 and 2006. These vehicles would be old enough to be scrapped.
But Mr Roy of Wearnes said he is not so optimistic, because high car prices will just persuade more car owners to hang on to their existing vehicles.
This will crimp COE supply, which is determined mainly by the number of vehicles taken off the road. Already, deregistration has slowed substantially this year. Between July and October, 12,928 vehicles were deregistered - either scrapped or re-exported - 23 per cent down from the 16,766 in the corresponding months last year.
Besides deregistrations, the COE supply is also pegged to an allowable annual growth rate of the vehicle population, which was halved last year to 1.5 per cent. In September, Senior Minister Goh Chok Tong even suggested that it should go to zero, to curb road congestion.
The MTA has meanwhile lodged an appeal with the Land Transport Authority over the dwindling COE supply.
Industry watchers are not holding their breath for relief measures.
Mr John Rachmat, a transport analyst with Royal Bank of Scotland Asia Securities, sees the COE supply trend as 'a renewed supply-side push' to get people to use public transport.
He said: 'Generally speaking, such a move will bring the best result if there's an accompanying push for better service by public transport operators.'
Associate Professor Anthony Chin, who specialises in transport economics at the National University of Singapore, said the limited COE supply will bring the Government closer to its aim of managing road congestion.
'This, of course, helps to facilitate movement of goods and people and that's good for the economy,' he said.
However, it also means many people below a certain income level will not be able to own a car.
'But this is a market reality,' he said.
[email protected]
