Or why mainstream car buyers are much less accepting of Certificate Of Entitlement (COE) price rises in Singapore in 2021
SINGAPORE – The COE for Category A isn’t really that high.
Now that the screaming has died down and the pitchforks put away, let’s take a dispassionate look at history and how Cat A car-buying behaviour has changed quite a bit.
In this week’s news, COE prices are high: Category A, for cars with engines of less than 1.6-litres displacement and with less than 130hp rose to S$55,001 from S$53,709 last round. That’s a modest increase but as CNA points out, this is the highest its been in more than five years.
Category B, for cars with engines larger than 1.6-litres or with more than 130hp, dropped a little to settle at S$79,601. The last time we saw that sort of price level, despite the drop, is S$75,010 in the first round of April 2014.
Are we seeing a stabilisation of COE prices after continued price hikes? Ben thinks we might, thanks to cheapskate car buyers.
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So we all know why the prices have risen: The majority of the cars on the road here are new, and because the COE quota operates on ‘one car out = one car in’ zero growth policy, supply is limited, and prices are high. As mentioned here before, we actually expected car prices to hit this level sooner but COVID has put a dampener on car sales.
Another COVID related fact: The only two price dips for Cat A COEs this year have been related to COVID – July’s dip, with the KTV-Jurong Port spike, and blanket WFH recommendation in September during the ‘Stabilisation Phase’.
But back to historical analysis. Looking at history, June’s second round of bidding in 2016 :
|Cat A||Price||Quota||Bids Received|
|November 2nd Round 2021||S$55,001||537||706|
|June 2nd Round 2016||S$55,200||2,252||3,957|
And here Cat B for now, and April 2014.
|Cat B||Price||Quota||Bids Received|
|November 2nd Round 2021||S$79,601||594||797|
|April 2nd Round 2014||S$84,504||363||523|
You’ll immediately notice that rather insane-looking quota for Cat A in 2016 – that’s when a lot of deregistrations happened just prior. Lots of supply it looks like, but wait – plenty of demand: 3,957 bids received is something we haven’t seen for years now, and it’s 175 percent of the quota, compared to 130 percent for the present day.
But look at Cat B for 2014: Low quota and pretty much the same bids received too, proportionally.
What stands out for me here is the difference between Cat A and Cat B: Despite the low supply, Cat A is almost S$25k cheaper than Cat B now. During our named dates it was much, much less:
2014 April’s second round Cat A and Cat B: S$71,335 vs S$75,010 – S$3,675.
2016 June’s second round Cat A and Cat B: S$55,200 vs S$57,010 – S$1,810 (!).
Which brings us to our hook at the start (sorry but COE stories are really boring) – looking at history, we’re lucky that Cat A hasn’t followed Cat B, which would result in mainstream car sales imploding and Porsche outselling Honda once again.
Why? My conclusion is that mainstream carbuyers (Cat A buyers, that is) are less accepting of higher COEs and don’t NEED the car – they have a lot more choice now with public transport be it the kickass MRT system or ride-sharing. In the meantime, generally speaking, Cat B buyers are on the fat end of things and don’t mind paying more. Their reasons and behaviour for buying a car haven’t changed, so prices haven’t changed either.
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