COE Analysis: Heightened Alert

Just as COE premiums seem to be reaching new heights, a nasty resurgence of Covid-19 appears to send them tumbling back down again


When we last wrote this column a month ago, COE premiums were on an upward trend. Consumer confidence was high, and car dealers were feeding it with a slew of new model launches following a fallow pandemic-hit 2020.

In a sign of how quickly things can change in this current climate, a resurgence of Covid-19 cases in Singapore has sent punters away again. In the midst of tightened restrictions and general panic, COE premiums have seen a subsequent decline as a result.

Singapore announced an initial tightening of measures on 4 May following a sudden increase in Covid-19 cases, and the market responded the next day with a slight dip, with both categories A and B COEs seeing a drop of about S$1,000 each during the first bidding exercise of May.

Nevertheless, it was still mostly business as usual. Car brands were still launching new models, and trying to assuage customers that all was well. It went so well that a product manager from a major Japanese brand here told us, “We sold out a year’s allocation of one of the new models in just three months, and now we need to request for more stock.”

But the Covid-19 situation quickly worsened, and on 14 May, the Government announced that Singapore was moving into a Heightened Alert phase with even tougher social restrictions. While showrooms remained open, occupancy limits were strictly restricted, and social interactions were limited to just groups of two (meaning you could not bring your family and friends down to check out that new SUV you’re eyeing). The public were ‘strongly encouraged’ to stay at home, and only head out for essential reasons, and in Singapore, buying a car isn’t exactly regarded as ‘essential’.

The upshot of all that is that within a space of a month, Cat A COEs, for cars with engines up to 1.6-litres in capacity and with less than 130hp, went from S$49,640 at the end of April, to ending at just above 40 grand, at S$41,801 as of the second bidding exercise in May. Premiums tumbled by S$6,201 alone between the first and second biddings in May, indicating how rapidly the situation developed in just two weeks.

Cat B COEs, for cars above 1.6-litres in capacity or more than 130hp, recorded a slightly less drastic fall to S$58,089, a drop of almost 2 grand. The Cat E Open category meanwhile, which is open to any vehicle except motorcycles, but is usually a proxy for Cat B cars, inched down a grand to end at S$62,000.

The difference is clearly evident. Cat A buyers are mostly mainstream, bread-and-butter customers, and the prospect of a worsening pandemic does have the potential to impact their finances greater than most. 

Cat B, and to some extent Cat E, buyers, while not completely insulated from the pandemic, tend to have a bit more wriggle room, given that they mostly shop at the higher end of the market. That’s not to say they will continue to flood showrooms, but a Mercedes-Benz S-Class buyer, for example, is probably in a better position to buy now and maybe take delivery later in the year once the situation has improved.

Which way things go from here will depend on how Singapore manages this latest wave of Covid-19 cases. The possibility of a second lockdown has not been ruled out, and if that happens, we might see another disruption in COE bidding. The pandemic has certainly upended many aspects of our lives, and the car industry is no exception.

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