COE premiums saw a slight drop in Cat A in the first bidding exercise for October 2021, but Categories B and E rose instead, perhaps driven on by strong demand of electrified models

SINGAPORE

In the first COE bidding exercise for October 2021, premiums in Category A, for ‘mainstream’ cars with engines less than 1.6-litres in capacity and output of less than 130hp, prices dropped by slightly under a thousand dollars, dipping by S$999 to end at S$47,001, from S$48,000 previously.

However, Categories B and E saw an uptick instead, with both recording an increase in their premiums. Cat B, for cars with engines that make more than 130hp, or are above 1.6-litres in capacity, rose by S$1,890 to end at S$70,200, from S$68,310 previously, breaking past the 70 grand barrier for the first time since 2015.

Category E, which is open to all vehicles except motorbikes, but usually ends up being used for big cars, saw an even larger increase, rising by S$2,754 to end at S$72,756, from S$70,002 previously, continuing the upward trend that this category has seen in recent months.

The difference in fortunes between Categories A and B is starting to become more stark. As explained previously, market sentiment remains weak in the wake of the pandemic, and buyers of mainstream vehicles, who mostly shop in the more affordable Cat A segment, are tightening their budgets in these uncertain economic times.

But those shopping in Categories B and E tend to have more financial flexibility, and it is they who are fuelling the demand for cars. Mercedes-Benz, for instance, are doing brisk business following the recent introduction of new models, such as the electric EQA crossover. Then there’s also Tesla, which have been racking up plenty of sales and are ramping up deliveries after months of pent up demand.

It should also be noted that the increasing proliferation of electric vehicles (EVs) here could also be a decisive factor in propping up premiums. At the moment, most EVs reside in Cat B, as many of them cross the 130hp/97kW threshold that disqualifies them from netting a Cat A COE. And yet their retail price may not necessarily be too far off from a regular Cat A model thanks to generous taxation rebates accorded to them, as evidenced by the likes of the MG 5 EV.

It appears then that the divergence between Cat A and B might be something that could trend for the year ahead, and prices may rise even more given that further cuts to the COE quota are expected over the coming months. Short of a major restructuring of the COE system, that chasm could become bigger and bigger, with the only question being how large the gap would end up becoming.

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