By Leow Ju-Len
TIME TO CHEER if you’re on the hunt for a new car: COEs (or Certificates Of Entitlement) are cheaper yet again.

At the close of this week’s tender exercise for COEs – the final one in July – prices for both car categories reflected ongoing weakness in the new car market by falling.

In a nice bit of history repeating itself, Category A certificates (for cars up to 1.6 litres, or taxis) closed $584 down, at $14,101 – exactly where they were a month ago.

Meanwhile, slack demand also saw Category B COEs (for cars above 1.6 litres) drop, in their case by a more dramatic $1,266 to $14,235, the lowest level since February.

Category E certificates (which can be used to register any kind of vehicle, but are normally used exclusively for cars) tracked the car COEs to fall as well, although by a less heady $803, to $14,858.

On the one hand, the market’s fall was to be expected. Dealers all around the island have been groaning about a quiet market for weeks and weeks now, pointing to general inflation, rising fuel prices, a slowing property market and even the ongoing financial crisis in the USA all putting people off buying new cars.

Nothing new to report there. Demand has been slack, and given the economic climate, looks set to remain slack for some time yet.

What’s interesting is how the COE supply is going to shape up once we’re mid-way into the current COE Quota Year (the Quota Year runs from May to April, since COEs were introduced in May 1990) in October, when the Land Transport Authority (or LTA) often makes an adjustment to the COE supply.

All across the island, car dealers are bracing themselves for a smaller pool of COEs from October onwards.

When this year’s COE quota was announced, the LTA made a provision for 91,800 vehicles to be deregistered. Looking at the data for the year so far, however, it looks as if just over 76,000 vehicles will be leaving the roads this year.

In other words, people haven’t been scrapping or re-exporting their cars as much as the LTA had forecast, and the vehicle population here could swell by more than 15,000 as a result.

Unless, of course, something is done, which is where October’s mid-Quota Year review comes in.

Looking at the figures above, some dealers are nervously expecting the LTA to trim the crop of COEs for the rest of the Quota Year. Indeed, some have been expecting that since May.

“Most of us were expecting them to slash the Quota this year,” says one general manager from a multi-brand franchise, about the COE supply for Quota Year 2008. “We were expecting it to drop by maybe 20 percent.”

Instead, the COE Quota shrank only a little, and the bulk of the supply reduction was reserved for Category E. But now that net deregistrations have turned out so low, the LTA could be forced to trim the Quota dramatically come October.

And you know what that means: with a smaller COE supply, competition will get fiercer for those prized certificates, and if all else remains the same, prices are bound to go up then…

Category A – CAR (1600cc AND BELOW) AND TAXI: $14,101

DOWN $584

52-week high: $17,999
52-week low: $8,118
Quota: 2,048
Bids: 2,464

OFTEN THE BID ratio (the number of bids divided by the number of COEs available) tells the story of how the market went, and this time around Cat A was 1.20 times oversubscribed, versus 1.21 a fortnight ago. Hardly any difference, in other words, which probably accounts for the slight fall.

If anything the market’s been surprisingly healthy for this certificate. That might have had something to do with the Car-nival sales show held by the Straits Times Classifieds team last weekend. A source from Cycle & Carriage Kia told us that the company “did quite well” at the event, and “hit sales expectations.”

Category B – CAR (ABOVE 1600cc): $14,235

DOWN $1266

52-week high: $19,802
52-week low: $13,114
Quota: 1,099
Bids: 1,307

LOOKING AT THE bid ratios again, we see a drop to 1.19 from 1.26 a fortnight ago, so it’s not surprising to see a corresponding drop in the price, and a fairly steep one at that. The real question is, why is demand so slack? Perhaps buyers are looking at petrol pumps and wondering if they really need 2.0-litres under the bonnet, when 1.6 would do?

Interestingly, though, with COEs at this level, some buyers might be tempted to go up the engine ladder and, say, spring for a Honda Civic 1.8 instead of a Civic 1.6. It’s happened in the past, after all. But that was when petrol was much cheaper, of course…

Category E – OPEN: $14,858

DOWN $803

52-week high: $19,510
52-week low: $13,301
Quota: 880
Bids: 1,178

LOWER BID RATIO, lower demand, lower price… The Category E story is as simple as that, it seems. There’s always an interesting subplot with this COE, however, especially since it’s transferable, unlike that other two. That means it can be stockpiled by dealers, and then deployed for “immediate registration”, for customers who want their cars right away.

But with the Seventh Month of the Chinese Lunar Calendar around the corner (this year it falls on august 15th), and with many customers still refusing to take deliver of their cars during that haunted, ghost-filled month, who wants a stockpile of Cat E COEs lying around?