By Leow Ju-Len

MOMENTUM SEEMS TO count for a lot in the Singapore car market, if this week’s results from COE bidding are anything to go by.

Prices for both car categories continued a rising streak from a fortnight ago to end up
near their 2009 highs.

The Category A COE (or Certificate Of Entitlement) for cars up to 1.6 litres or taxis ended this week’s tender exercise at $4,890, up $430 from a fortnight ago.

Prices for the Category B certificate (for cars above 1.6 litres) were lifted to $5,101 this week, or $212 more than at the close of the last COE auction.

Only the Open Category COE, which can be used to register any type of vehicle, saw a fall in price, closing $189 lower at $5,700.

Dealers say prices have generally been lifted by a surge in demand that was brought on by the Land Transport Authority’s recent announcement of a cut in the COE quota from April.

“The last month’s been good, but that’s only because of panic buying,” says a general
manager we spoke to from a distributorship.

‘Panic buying’ might be putting it a bit strongly, but there’s no doubt that there’s been a mini boom in car sales, brought about by anticipation of a smaller COE supply in the coming months.

The expectation is that, all things being the same, the tighter supply of COEs will soon make them more expensive.

And human nature being what it is, if enough people think that something will become pricier tomorrow, they would rather buy today – thus pushing prices up immediately.

There may be signs that the sales bonanza that started a month ago could be slowing, however.

At least one sales manager we spoke to said that things had picked up sharply a month ago, but the two weeks before this auction were relatively slow. “I think we’re back to the quiet period,” he lamented.

Certainly, the dip in Category E’s prices could forewarn of slowing demand, suggesting that dealers are feeling increasingly disinclined to hoard them for deployment in the near future.

Then again, thanks to the tumultuous times we live in, the car market is becoming harder to generalise.

While some showrooms grow quiet, others have remained noisy with activity. Volvo, for example, has reportedly had an excellent fortnight, with one source from distributor SM Motors saying that the showroom had seen its best traffic in at least four years.

Buyers have been tempted in specifically by 2.0-litre versions of the Volvo S40 and C30, the introduction of which have made those models more cheaply available than ever before.

Our Volvo source called the strong response surprising, but mused that it probably shows that “there are still people with money in the Milo tin.”

It shows, too, that confronted with a value proposition, these moneyed types are willing to buy, even in times like these.

The same pattern holds true with another hit car, the Kia Cerato Forte.

Feature-packed and aggressively-priced, the Forte has enjoyed sales so strong that Cycle & Carriage is believed to have mopped up some 400 COEs for the Kia brand alone this round.

Buyer quality has been high, too, in the sense that loan approval has been problem-free, with an unexpectedly high number of customers taking relatively conservative seven-year loans, or even paying in full cash.

That came as something of a surprise even to Kia’s custodians. Traditionally, the brand has tended to attract 100-percent-loan customers, after all, and not cash-rich people.

But Kia’s example, along with that of Volvo, speaks to the prevailing factors in the current market: there are people ‘with money in the Milo tin’ lurking around, and what it takes to lure them out is a value-for-money proposition.

In that sort of environment, brands with relevant products can still enjoy crowded showrooms.

Category A – CAR (1600cc AND BELOW) AND TAXI: $4,890

UP $430

52-week high: $17,999
52-week low: $2
Quota: 1,839
Bids: 2,376

PRICES ARE UP, but the number of bids received this week saw a dip from a fortnight ago, when 2,722 people competed for a Category A COE. That suggests that bids this week were more aggressive than from a fortnight ago, resulting in the higher price.

But generally, the trade itself seems to expect another slowdown. Cat A Toyota prices are all down by as much as $2,000, for example, despite the higher COE result. There’s no way managers at distributor Borneo Motors expect pricier COEs in two weeks time, in other words.

Category B – CAR (ABOVE 1600cc): $5,101

UP $212

52-week high: $19,539
52-week low: $200
Quota: 1,101
Bids: 1,346

SAME STORY HERE: the bid ratio (that is, the number of bids divided by the number of COEs available) dipped to 1.22 from 1.52 at last round’s COE auction. A $212 increase in price isn’t the sort of thing to trigger wild adjustments in car prices, though, so for many players Cat B the obvious response has been to simply hold prices.

Whether prices rise or fall in two weeks’ time depends on the how well the market is doing, and we suspect it will be slow on the whole. But there might be pockets of activity which, who knows, could keep demand going.

Category E – OPEN: $5,700

DOWN $189

52-week high: $19,389
52-week low: $3,000
Quota: 762
Bids: 1,298

THE ONLY COE to see a dip in its price, Category E could be a predictor of lower prices from the other categories to come. Since it’s transferable (unlike A and B certificates), it’s often handy as a speculative buy, and there are people who hoard them and then sell them on to car dealers and parallel importers when they are needed.

But if speculators believe the market is about to dip, it becomes risky to hold onto a Cat E COE – who will buy from you if COEs have gotten meaningfully cheaper than when you bought? This week’s result suggests that speculators are wary of a falling market.