Surge in COE prices for small cars on back of ‘brisk’ car sales

SINGAPORE — The heightened car-buying interest and a sales rush earlier this month triggered by a fall in Certificate of Entitlement (COE) premiums has caused premiums for small cars to shoot up almost 31 per cent in the latest round of bidding exercise.

The number of bids submitted, at 3,100, is almost double that from the previous round, when COE premiums for small and large cars fell to the lowest in more than eight years.

The last time the number of bids received went over the 3,000 mark was in March last year, totalling 3,190. Car dealers typically submit bids on behalf of customers while processing orders for cars.

At the close of the bidding exercise on Wednesday (July 18), premiums for small cars, or those in category A (up to 1,600cc and engine power not exceeding 97kW) surged to S$32,699, up from S$25,000 in the last exercise.

The spike was less drastic for large cars (above 1,600cc or 97kW), with premiums rebounding to S$32,551 from S$31,000, a 5 per cent increase.

For the open category, which can be used for any type of vehicles, premiums went up by 5.83 per cent to S$32,809.

In other categories, COE prices for goods vehicles and buses continue to fall, with a slight dip of 0.65 per cent to S$30,889.

For motorcycles, prices also went down by about 4.9 per cent to S$6,189, compared with S$6,514 in the last round.

Motor-car traders, who have been seeing more people at showrooms recently, were not surprised that demand had pushed up COE prices and number of bids, adding that the figures will continue to go up.

Mr Ron Lim, head of sales and marketing at Tan Chong Motors, said that the “floodgates opened” earlier this month, and with a “very strong” demand from the market, COE prices going up was “more or less expected”.

Mr Jeremy Soh, director of used vehicle firm Inchcape Pre-Owned, described it as a situation where “everyone waiting on the sidelines finally jumped in… and rushed in to grab a good deal”, resulting in showrooms seeing “brisk sales”.

Mr Soh, who is also honorary secretary of the Singapore Vehicle Traders Association, said that prices should continue to see a “gradual uptrend”.

“There’s still a demand out there for cars, (especially) from people who have held off on their purchases…. (They will act soon), knowing that the longer you wait, the prices (may) go up,” he added.

Mr Lim foresees that the COE premiums for small cars should hover around the same prices the next round.

“Not all the bids have gone in yet, so from now until the next bidding round, we have to see… Once the backlog has been fully digested, (then we can have) a fuller picture,” he said.

Agreeing, Mr Raymond Tang, managing director of Yong Lee Seng Motor, said that the bids received this time does not reflect “even 50 per cent of (car) orders collected” in the past two weeks.

One reason is also that there is a limited quota and bids have to be held over and submitted the next round.

Mr Tang believes that the COE premiums might have gone up to S$35,000 for small cars, if not for motor firms having to “stagger” their bids over different rounds of the bidding exercises.

Even with the increase this round, the COE premiums for cars are still considered quite “low” compared with five years ago, so there should be still strong consumer interest. There is also the upcoming car expo fair in October to capture the market.

“There will be another big collection of orders again (during that time), so I don’t think we will see any (big) changes in prices until as early as 2019,” Mr Tang added.

NUMBERS AT A GLANCE

Cat A (Cars up to 1,600cc & 97kW): S$32,699 (up from S$25,000)

Cat B (Cars above 1,600CC or 97kW): S$32,551 (up from S$31,000)

Cat C (Goods vehicles and buses): S$30,889 (down from S$31,092)

Cat D (Motorcycles): S$6,189 (down from S$6,514)

Cat E (Open): S$32,809 (up from S$31,001)