A three week break between bidding exercises resulted in the inevitable rise in COE premiums, but things are not as straightforward as it seems

SINGAPORE

While COE prices do tend to be unpredictable, there are some things which generally holds true. Typically, if there’s a three week lull in between COE biddings, as opposed to the usual two week interval, the premiums would usually see a rise over the previous exercise.

This is because dealers would have had more time to collect orders during that time, and thus there would be more competition during the bidding exercise due to pent up demand. 

And so it has proven with the latest COE exercise for September, with premiums edging upwards from the previous bidding in August. Category B, for cars with engines that make more than 130hp, or are larger than 1.6-litres in capacity, saw prices go up from S$61,001 to S$62,600, an increase of S$1,599.

Category A, the certificate for ‘mainstream’ cars (with less than 1.6-litres of engine capacity, or less than 130hp output), saw a more modest increase, going up by a mere S$311, from S$46,689 to S$47,000.

Perhaps more interestingly, Category E, which is Open to all vehicles except motorbikes, saw a drop instead, albeit a minuscule one of S$201, from S$64,901 to S$64,700.

The increase in premiums don’t seem too drastic for a typical three week break period, so what gives then? While part of it could be due to a slight correction on the market, given that the second bidding for August saw significant rises across the board, industry sentiment are pointing towards generally weaker consumer confidence as a result of the impact of the pandemic.

Rises are inevitable, given that COE quotas are being progressively cut, but the signs are that consumers, especially those shopping in the mainstream Cat A, are being more cautious with their spending amid the general economic uncertainty. While Singapore is on the road to recovery from the pandemic, the country is not quite out of the woods yet, and it’s only natural that car buyers would prefer to hedge their bets for now until the picture becomes clearer.

Cat B is generally less susceptible to such external influences, but their strong showing can also be attributed to a few other factors. Aside from the fact that the consumers in this arena tend to have a bit more leeway in their finances, there’s also far more competition in Cat B now as opposed to Cat A.

Cars like the Volkswagen Golf, which used to compete with the Toyotas and Hondas in Cat A, are now jostling for Cat B COEs with Mercedes-Benzes and BMWs, yet without too much of a premium attached to its price tag. The signs are that consumers are starting to place less significance on the dividing line between Cat A and B now, and instead the final selling price is what sways their ultimate purchasing decision.

If that’s the case, then perhaps we might see Cat B eventually reach parity with Cat A, but that might not happen for quite some time. In the meanwhile, we might see premiums continue to rise based on the current trajectory. But as the past year and a half has shown, you never know when you’ll get another spanner in the works to disrupt proceedings once again.

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