By Leow Ju-Len

JUST AS A rising tide lifts all boats, the improving economic sentiment seems to have given COE premiums yet another lift.

Prices rose for all COE (or Certificate Of Entitlement) categories except for the motorcycle certificates this week, continuing an uptrend that began to take off after February’s market lows.

The COE for cars below 1.6 litres and taxis (Category A) climbed $981 to end Wednesday’s bidding at $15,291, while the certificate for cars above 1.6 litres (Category B) rose more steeply, gaining $1,700 to end up at $18,501.

Like the car COEs, the Open Category certificate (which can be used to register anything with wheels) also hit a fresh 52-week high, although this came on the back of a gentler rise, the price gaining $688 to end up at $18,189.

Although it seems perverse, car dealers often greet rising COE prices as good news. For one thing, since prices are determined purely by the interaction of demand and supply, whenever COEs get more expensive it’s a fairly reliable indication that interest in car buying has picked up.

For another, when prices are on a steady climb as they have been in recent months, car salesmen can whisper to customers that they should perhaps buy a car today in case they get more expensive tomorrow, thus scaring them into immediate action.

But the COE market is ultimately a pricing mechanism designed to adjust the affordability of cars to weed out buyers who can only take so much financial pain. Therefore, by definition as prices get higher, more and more would-be car buyers eventually start to mug up on bus schedules instead.

In other words, once the pendulum has swung too far it eventually runs out of momentum, and some dealers are worried.

“We see some tough times ahead,” confided a senior manager from a distributorship for a Korean marque. “It’s not that we won’t be able to deliver cars at these COE prices, it’s more that there’s a certain ‘resistance level’ for our buyers. If prices cross this level, then they’re bound to stop and think twice about buying.”

For others, the higher prices have already had an effect. “Our sales have actually slowed down quite a bit since maybe two rounds of COEs ago,” says the sales manager for a mainstream German brand. “Especially after we adjusted our prices upwards, which we had to do of course.”

As prices climb, however, the market tends to skew towards the wealthy - the sort of buyers who want or need a new car, and can pay for it without worrying about whether COEs are up and down.

For that reason, the market today is almost certainly being influenced by what we’ll call the Mercedes Factor. Order books for the all-new E-Class are open, and Cycle & Carriage already began bidding for so early bird customers will receive their cars once it’s launched here early next month. That tells you why Category B COE premiums are on the rise, and perhaps the scary thing is that a senior manager from C&C told CarBuyer that, privately, he is expecting the price to cross the $20,000 level soon.

The Mercedes Factor might soon be at work in Category A, too, with deliveries of the (1.6 litre) C 180 Kompressor expected to begin in earnest soon.

But it’s ultimately the E-Class that could give the market a good shake-up. There are some 10,000 active E-Class drivers on the road, many of whom will be extremely interested in the new car.  And if pre-launch orders have been enough to bump Cat B COEs already, just imagine what will happen after the car’s actual arrival.

“So far we’ve collected orders from die-hard customers who definitely want the car, know what colour they want, don’t need to test drive the car and so on,” says the senior manager we spoke to. “Wait till the car is here, and the rest of them get to actually see it and drive it…”

Category A – CAR (1600cc AND BELOW) AND TAXI: $15,291
UP $981
52-week high: 15,291
52-week low: $2
Quota: 1,408
Bids: 1,603

ONCE AGAIN, THE bid ratio (the number of received bids divided by the quota) for Category A fell, this time from 1.18 to 1.14, and yet prices are slightly up. This of course means that dealers have been armed with thicker margins on the back of raised car prices, in turn allowing them to bid more aggressively.

There’s a general sentiment that COE prices are on a general uptrend anyway, and if that’s the case  dealers will feel that if they bid timidly this time and miss out on a COE, they will almost certainly have to pay more in two weeks’ time. No sense pussyfooting about it, then.

Category B – CAR (ABOVE 1600cc): $18,501
UP $1,700
52-week high: $18,501
52-week low: $200
Quota: 762
Bids: 992

IF ANY COE is going to be sensitive to change in demand, Cat B is probably it. The quota is a tiny 762 certificates, making it easy to fill and ensuring that competition for the certificate is intense. Add in a hot new seller in the form of the upcoming Mercedes E-Class, along with improving economic sentiment and it’s hard to see Cat B easing off in price.

Market leader Borneo Motors has bumped Toyota’s Cat B prices up by up to $3,000, despite a rise of just $1,700 for the certificate itself this week. Clearly, managers there expect to see even higher prices in a fortnight’s time.

Category E – OPEN: $18,189
UP $688
52-week high: $18,189
52-week low: $3,000
Quota: 716
Bids: 1,352

ARE YOU A gambling man? Not that we would ever condone such a thing, but it’s not unheard of for speculators to mop up the odd Open Category COE here and there. Being fully transferable, they’re perfect for punters who believe the market is on the up. Buy one today for 18 grand, and if COEs cost 20 grand next month, ring up a friendly sales manager and make the offer…

Interestingly, this week’s price has trailed that of Category B, when it’s usually higher. We’re not sure what that means - just as well we’re not speculators, then…

A BUMP IN Open Category COEs heralds boom times, as it’s here that speculators buy COEs, hoping to sell them for a profit later on (Cat E contains transferable COEs).

This time it looks like an overflow from construction and commercial vehicles fed demand – off our charts, Cat C (Goods Vehicles and Buses) had a whopping $4,273 increase. No one would rule out some Cat B spillover, either.