COE Analysis: Upwards and Onwards

COEs hit new highs in April 2021 on the back of reduced quotas and a flood of new car launches, and expect prices to go up even further in the months ahead


Back at the tail end of 2020, our chief editor Derryn stated that ‘the era of sub-S$35k COEs is over’, and predicted that S$50k COEs will emerge in 2021. That was during December when Category A COEs, for ‘mainstream’ cars with engines up to 1.6-litres in capacity and with less than 130hp, breached the S$40k mark for the first time that year, while Category B COEs (for more powerful/larger-engined ‘luxury’ cars) flirted dangerously with the S$50k barrier.

Lo and behold, Derryn’s words were indeed prescient. In the first bidding exercise for April, Cat B COEs finished at S$52,309, the highest since the end of 2017. Category E, which is open to any vehicle except motorcycles, but is usually a proxy for Cat B cars, followed closely behind at S$52,200.

Cat A saw a reasonably modest rise to S$45,600, but the trend is relatively telling. A combination of a reduced quota, along with a flood of new models, especially at the higher end of the market, appears to be the primary driving factor behind the increases.

March saw the arrival of BMW’s high performance M3, M4 and M5 models, Lexus’ facelifted LS luxury limo, and, perhaps crucially, the all-new Mercedes-Benz S-Class, a car which instantly sold out at launch despite its half a million dollar price tag.

But contributing to that as well is the fact that the Land Transport Authority (LTA) have been reducing the quota for COEs progressively this year. The February to April 2021 period saw a 13 percent cut from the previous quarter, and Categories A and B each got between 1,700 to 1,800 COEs a month for that period, while Cat E received slightly less than 600 COEs. As CNA noted in its report, this is the lowest the quota has been in six years.

It’s not hard to deduce that a significant chunk of those COEs went towards those newly-launched models. And it’s unlikely to stop there as well. The rest of April will see a whole slew of new models land on our shores as car brands make up for lost time following a pandemic-disrupted 2020. Tellingly, it’s the mainstream non-luxury Korean brands, Kia and Hyundai, which will be jostling for the Cat B pie, as they line up their new Carnival and Palisade large multi-people vehicles for sale here.

That will exert even more pressure on the already-crowded Cat B market, and things are unlikely to ease up any time soon, given that there will be even more quota cuts in the months ahead. The quota for May to July 2021 will see a further 10 percent reduction, and while it translates to only about 100 less COEs per month for both Cat A and B over the previous quarter, in a highly competitive market, every COE counts.

And things could be complicated by yet another factor, as pointed out by a general manager of a Japanese brand. 1 July 2021 sees more pollutive cars, which generally tend to be the higher end models, incur increased penalties under the revised Vehicular Emissions Scheme (VES). As such, dealers may have more incentives to push these models out the door before buyers end up having to pay up to S$5,000 more in surcharges after the 1 July deadline.

All of these could add up to a very intriguing three month period ahead, and expect COE premiums, especially in the now very crowded Cat B, to go up even further. Who knows, it might even breach the S$60k mark. If it comes to pass, you know where you’ve read about it first.

about the author

Ben Chia
CarBuyer's senior staff writer went out to explore the Great Big World, including a stint working in China (despite his limited Mandarin). Now he's back, ready to foist upon you his takes on everything good and wonderful about the automotive world. Follow Ben on Instagram @carbuyer.ben