By Leow Ju-Len

THERE’S BEEN NO respite for bargain hunters in the car market, with prices for COEs continuing to head North to hit new highs for 2009.

The COE (or Certificate Of Entitlement) for Category A (for cars up to 1.6 litres, or taxis) gained $1,209 from a fortnight ago to end this week’s bidding at $12,899, while the Category B certificate (for cars above 1.6 litres) surged $2,951 to $14,840.

As for the Open Category COE, which can be used to register anything on wheels, the price zoomed past to $15,100, climbing $2,199 in the process. Indeed, this is the first time since October last year that a COE has cost more than $15,000.

By and large, the result will have cheered the car industry. Dealers bid for COEs on behalf of their customers only after securing a sale, after all, so rising COEs are a direct consequence of rising demand.

On the other hand, there’s also no pleasing the motor trade entirely. Demand has undoubtedly picked up, says the trade, but not to an especially high level. “The quota is so small so it’s very easy to fill,” says one general manager we spoke to. “If you think about it, last year we also had $15,000 COEs but that was with over 2,000 pieces for Cat A and more than 1,000 for Cat B.”

That much is true: with over 3,000 COEs per fortnight to find buyers for (excluding Open Category COEs), demand a year ago was high enough for prices similar to today’s, even though there are now but two-thirds the number of COEs available.

Of course, dealers should still be happy about two things.

First, even if demand isn’t as strong as before, it is still picking up. Second, human nature means that unless prices have climbed enough to spook buyers off cars completely, those who are sitting on the fence about their car purchase will probably be nudged into action by the rising prices. Given that COEs now seem to be on an uptrend, such buyers are likely to reason that buying a car today will be cheaper than doing it a month or two from now. Might as well buy now, then.

This self-fulfilling force means that rising prices can in turn lead to even higher prices, but it of course has to be backed by consumers’ ability to pay. Here, there’s room for a little optimism in the trade. While the economy isn’t exactly firing on all cylinders, the tide of bad news that crashed over us in the early part of the year seems to have receded somewhat. No more major banks have tumbled, and layoffs seem to have slowed down. Chrysler has even emerged from bankruptcy and started building cars again in seven of its plants.

Perhaps those who put off buying a new car for fear of suddenly finding themselves in the job market have reasoned that if they haven’t been made redundant by now, they’re probably in the clear. That makes it feel safe to sign on the dotted line of a sales contract, and since prices are still low, why not?

It’s worth pointing out, too, where the money is coming from: Singapore is an island of 4.8 million people, and there are but 550,000 passenger cars out there, so the luxury of car ownership is restricted to fewer than 12 percent of the population.

To be more precise, the Ministry of Manpower says that 2.95 million people are at work here, which still means that car ownership is exclusive to just 18.6 percent of the gainfully employed. As for cars on the showroom floor, the current Quota Year provides for roughly 69,000 new car sales, which in turn means that filling the entire quota would involve a little over 2.3 percent of workers.

For a developed nation, that’s a tiny proportion of the working crowd. Should we really be surprised, then, that COEs are now meaningfully oversubscribed? As for the next time out, the COE market only reopens in three weeks’ time instead of the usual fortnight. This is an offshoot of COE auctions taking place on the first and third Mondays of every month. Some months have five Mondays, of course, resulting in a three-week break between bids, and giving dealers an extra week to collect orders.

This typically results in a sort of ‘three-week bounce’, driven by the spike in demand from those extra orders, so expect July to open with higher COE prices. That suggests, of course, that fence-sitters should jump off and head for showrooms to catch the lower side of rising prices.

Which, of course, is roughly where we came in…

Category A – CAR (1600cc AND BELOW) AND TAXI: $12,899
UP $1,209
52-week high: 14,685
52-week low: $2
Quota: 1,415
Bids:1,735
ASKED HOW THE new 1.6-litre version of the Mercedes-Benz C-class was selling, a senior manager from Daimler Singapore cheerfully replied, “Very well!”. Throw in robust sales from Volkswagen and the resurgent Koreans, and it’s easy to see how things in Category A are getting ever more crowded. The bidding volume is actually down from a fortnight ago, which tells you that dealers are bidding more aggressively; perhaps they expect even higher prices in future, and would rather bid strongly now to get it all over with.

Category B – CAR (ABOVE 1600cc): $14,840
UP $2,709
52-week high: $15,501
52-week low: $200
Quota: 760
Bids: 1,066
CATEGORY B IS seen as the province of Toyota Camrys, Honda Accords, and the German luxury brands, and sales here have been surprisingly healthy. Where is the money coming from, in this recession year? “Well, if you haven’t lost your job, your budget for a new car must be the same as before, or maybe even higher,” explains one general manager we spoke to. “But what you paid for a Camry a few years ago can buy you a Mercedes C-class or BMW 3 Series now.” Makes sense to us.

Category E – OPEN: $15,100
UP $2,199
52-week high: $1
52-week low: $3,000
Quota: 717
Bids: 1,516
OPEN CATEGORY COES are slightly speculative, given that they are fully transferable, so there’s usually a premium to be paid for them. Given how close this week’s result is to Cat B’s price, however, perhaps the bidding action was spilled over from the large car end of the market.
Around 40 percent of cars here are above 1.6 litres, after all, so the tiny Cat B quota just isn’t enough to satisfy demand. Step up, Cat E…