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COE prices hit new highs; Open category premium soars to $137,000

2023-09-08 00:00:00.0 海峡时报-新加坡原网页

SINGAPORE – Certificate of entitlement (COE) prices for bigger cars and the Open category reached new highs for the third tender in a row, with the premium for an Open COE rising to $137,000.

The COE price for cars with engines larger than 1,600cc or more power than 130bhp, as well as electric vehicles (EVs) with power output that is above 110kW, rose by 3.85 per cent from $129,890 to $134,889 at the latest tender on Wednesday.

The premium for Open category COEs, which can be used for any vehicle type except motorcycles, but end up mostly for bigger cars, surged by 4.58 per cent from $131,000 to $137,000.

The premium for Category A, which is used for smaller, less powerful cars and EVs, ended at $101,000. This is $1,000 above the price set at the previous tender exercise a fortnight ago.

The commercial vehicle COE price finished 0.11 per cent above the previous $82,801 to end at $82,889.

The COE premium for motorcycles was the only category that fell. At $10,901, the latest premium is 4.39 per cent lower than the $11,402 set earlier.

The rising premiums for the Open category COEs, as well as those for cars, came on the back of fewer bids entered at the latest tender exercise.

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In the COE category for larger cars, for example, there were 15.24 per cent fewer bids registered on Wednesday than at the first exercise in August.

On the supply side, the number of COEs available for bidding in the respective categories was largely similar to the situation in the earlier two tender exercises.

The COE system allows bidders to revise their bid after they have been entered. So, while there were fewer bidders than earlier, they were more driven to put in higher bid amounts to secure their COEs.

Industry insiders said the current trend of rising COE prices shows that there are still not enough COEs to satisfy market demand. This is despite the 5.6 per cent increase in the number of COEs for the August to October period, compared with the previous three months.

The persistent rise in COE prices means that dealers will have to fork out more money to deliver orders that were taken earlier. This applies to deals that promise to deliver cars within three to four bidding exercises – or two months.

A dealer who has yet to secure a large car COE to deliver an order placed in July will now have to spend nearly $17,000 more to put the car on the road.

Dr Victor Kwan, who was in the motor trade for more than 20 years before becoming a senior lecturer at the Singapore University of Social Sciences, said it is not uncommon for motor dealers to absorb the difference in COE price, rather than lose a customer.

Mr Neo Nam Heng, chairman of diversified motor group Prime, said the hike in COE prices can be an issue for smaller dealers who may not have sufficient cash flow to deliver the cars.

On the possible reasons behind the latest rise in COE premiums, Mr Neo said there is strong demand for large, luxurious multi-seater cars preferred by limousine service operators.

These include the new Toyota Alphard, which has already been brought in by parallel importers, and the Toyota Vellfire, which Borneo Motors will be launching later in September. Some of the importers would have put in bids for COEs so that they can register the new cars as soon as possible.

Motor dealers said there is pressure to meet annual sales volume targets as the end of the year draws near.

In addition, car distributors would also be looking to clear their stock of cars before tightened pollutant thresholds under the enhanced Vehicle Emissions Scheme kick in on Jan 1, 2024.

This suggests that there will be no letting up on demand for COEs in the remaining seven tender exercises for 2023.

Dr Kwan said that while more COEs are expected to be available in the coming months, premiums will likely soften only in the second half of 2024.

Mr Neo said: “In the immediate term, I don’t know how much COE premiums will go up, but for sure, they will not come down.”