By Leow Ju-Len

“IT’S EASY TO see prices climbing even higher than they are now,” we wrote two weeks ago, but we little knew that they would do so with the assistance of rocket boosters. Yes, prices for COEs (or Certificates Of Entitlement) are back in the stratosphere, after hovering in mid-level flight for years.

Category A COEs (for cars up to 1.6 litres, or taxis) ended bidding at $28,389, recording a jump of $7,587. But even that sharp increase paled into insignificance next to the results for the other main categories.

The Category B COE hit $36,089, climbing a whopping $9,700 in the process, but the juiciest action was reserved for the Open certificate (or Category E, which can be used to register anything you like). That busted the $40,000 barrier to end up at $42,001, an unbelievable gain of $14,411.

Universally, the motor trade expected the market to rise, of course. To recap, the Land Transport Authority had announced that, come April, there would be far fewer COEs for everyone to play with.

Knowing this to be so, the savvy car buyer will have wandered showrooms over the past fortnight for that last ditch chance to buy a car in an era of relatively abundant COEs.

So it was that showrooms around the island reported healthy traffic. “Our sales were much higher than average,” said one general manager for a Japanese brand, of the first weekend after the LTA’s quota announcement. “The coming weekend should be even better.”

One or two dealers reported a quiet time, but by and large the trade was doing brisk business. Volkswagen, for example, reportedly had an ‘excellent’ first weekend after the announcement followed by a slightly quieter one, while over at Cycle & Carriage Kia, sales were predictably robust.

It must sound like the winners in all this will have been the car dealers, but it’s worthwhile remembering that healthy sales can often be a curse.

One brand raised prices for Category A cars by some $6,000, for example, and picked up plenty of orders, but given that the price for the COE has jumped $7,587, those orders will have been painful. If you put up prices by $6,000 and your cost goes up by $7,587, after all, each sale is bound to feel like snatching defeat from the jaws of victory.

Take pity, then, on the dealer who told us that his threshold for Cat A was at $27,000, and anything above that would mean selling his cars at a loss.

In cases like these, two things usually happen: salesmen call customers to sheepishly ask them to “top up” their COE bid, effectively paying more for their cars than initially agreed, or the deal simply lapses altogether when it’s a “non-guaranteed COE” package.

It’s not unheard of for a sale to end up not a sale after being undone by rising COEs, and one major dealer is rumoured to have failed to deliver cars to customers for cars booked during a Chinese New Year promotion.

The thing to do, then, is to lock dealers into committing to delivering you a car at today’s prices, if you think tomorrow’s prices will be even higher. “That’s what the smart customers would be doing, anyway,” said one CEO of a multi-brand franchise. “But then I’m not so sure if I’d be willing to take any orders right now for a car that I can only deliver in a few months’ time.”

Ultimately, the question then is whether after this week’s spike, there’s room to go even higher. One thing worth nothing is that the COE price jump was purely demand-driven. “I’d say it was panic buying before the smaller quota cuts in,” says one PR manager we spoke to.  Price went up purely in anticipation of higher prices, in other words. The actual cut in the COE quota actually only takes in effect in two weeks’ time.

If you were the pessimistic sort, then, you’d be forgiven for thinking right now that the worst is yet to come.

Category A – CAR (1,600cc AND BELOW) AND TAXI: $28,389

52-week high: $20,802

52-week low: $7,090

Quota: 1,146

Bids: 2,183

THE IDEA THAT this COE has room to climb even after a $7,587 jump is evidenced by what the motor trade is doing. Some players raised prices simply by an additional $7,500, but over at Borneo Motors, prices for the Cat A Toyota models are up anywhere from $10,000 to $12,500.

Clearly, managers there think that in two weeks’ time a Cat A COE will be even more expensive than it is today. And why not? The Quota is set to fall almost 40 percent, after all. Unless the market suffers some kind of catastrophic drop in demand, the scarcity of COEs alone should squeeze prices even higher.

Category B – CAR (ABOVE 1,600cc): $36,089

52-week high: $36,089

52-week low: $7,490

Quota: 711

Bids: 1,207

WITH MANY CAR dealers, the usual practice when collecting orders for cars that aren’t here yet is to wait until their stocks arrive, and then secure a COE to register the car for the customer. But this time out there’s some belief in the market that some dealers went in to bid for their Cat B COEs early.

Why would they so such a thing, and risk pushing prices up higher than necessary? Clearly it only makes sense if the trade believes that COEs will end up even more pricey in two weeks’ time, so take that as a sign of things to come…

Category E – OPEN: $42,001

52-week high: $27,590

52-week low: $7,326

Quota: 587

Bids: 1,184

THE INTERESTING ONE is always Category E, which is transferable and thus, good for keeping around in a pool. Cat E prices are thus a great indication of speculative demand. It doesn’t matter if it’s $42,000 now if you believe that in a month’s time, Cat B will be at $50,000, for example.

Therefore the real evidence that the car trade thinks COEs will be much more expensive from April onwards is in how much it has bid up Category E. “I wish we banked maybe 50 more Open Cat COEs,” one CEO told us a week ago. “I’d sleep a lot easier…”