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Car prices set for slight dip amid higher COE supply

SINGAPORE — The quarterly supply of Certificates of Entitlement (COEs) will be increased for the first time in six months, with an average of 8,795 certificates — or 8.9 per cent more than the previous round — available each month between February and April.

SINGAPORE — The quarterly supply of Certificates of Entitlement (COEs) will be increased for the first time in six months, with an average of 8,795 certificates — or 8.9 per cent more than the previous round — available each month between February and April. 

The quota for cars will go up by 11.6 per cent, while the number of COEs available for motorcycles as well as goods vehicles and buses will fall by 6.6 per cent and 10.8 per cent, respectively, based on numbers released on Thursday (Jan 19) by the Land Transport Authority (LTA). 

However, while car sales traditionally dip after Chinese New Year, traders and analysts do not expect premiums in the first bidding exercise next month to fall due to a backlog of orders from motor shows held earlier this month, among other factors. Over the coming year, they expect the premiums to soften gradually because of the subdued economic outlook and the possible consolidation of the private- hire car market.

SIM University senior lecturer Walter Theseira said: “If the market consolidates, I expect to see demand for COEs from private hire fleets fall. COEs from the private hire fleet may also get recycled back into COE supply because private hire vehicles are heavily utilised and will probably be disposed by export well before their COE lifespan is exhausted.”

A total of 26,391 COEs will be available between next month and April, the highest since the May to July period last year. The Open Category — which can be used for any vehicle but ends up mainly for luxury cars — will see the greatest jump in the COE supply: 963 certificates will be available on average each month, 20.5 per cent higher than between November last year and this month. 

The quota for Category A (up to 1,600cc and maximum power output not exceeding 97kW) will increase by 11.3 per cent to 4,104 each month, while the supply for Category B (above 1,600cc or maximum power output above 97kW) will go up by 9.2 per cent to 2,714 each month. On average, 692 and 322 COEs will be available each month for Category D (motorcycles) and Category C (goods vehicles and buses), respectively.

The COE quota depends mainly on the number of vehicles deregistered. The number of deregistrations — and in turn the COE quota — is expected to stay high for the next two years, with figures showing a high number of vehicles on the road today close to their 10-year mark. 

Traders said they do not expect drastic movements in COE premiums in the coming months. 

Mr Jeremy Soh, honorary secretary of the Singapore Vehicle Traders’ Association, said the first few rounds of bidding under the expanded quota could be muted, and any fall in premiums will be gradual. Nevertheless, he added: “Historically, after the Chinese New Year period, premiums tend to dip a little bit, because the demand is highest right before this period.” 

Mr Raymond Tang of Yong Lee Seng Motor reiterated that motor traders were still clearing their orders and this could prop up the COE demand. 

Assistant Professor Terence Fan from the Singapore Management University said the higher COE quota could “nudge prices a bit lower”, but on the whole, the demand from the private car hire market would have a greater bearing. Last week, the Straits Times reported that private-hire operators are plagued by a rising number of unhired cars.

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