COE supply for Aug to Oct to drop by 11.5% as LTA announces new counting method to reduce volatility
- The Land Transport Authority announced on July 22 a new counting method for COE quotas aimed at reducing supply fluctuations
- The number of COEs available for bidding in each quarter will no longer be based on the number of vehicles deregistered in the previous quarter
- Instead, it will be based on a rolling average of deregistrations over the last two quarters
- One industry player says the new method would help mitigate supply fluctuations by up to 20 per cent
- Under the new method, the COE quota for August to October this year will be 10,581, 11.5 per cent than the previous quarter
SINGAPORE — The supply of Certificate of Entitlement (COE) from August to October will drop by 11.5 per cent compared to the previous quarter, with the Land Transport Authority announcing on Friday (July 22) a new counting method aimed at reducing supply fluctuations.
Instead of having the number of COEs available for bidding in each quarter based on the number of vehicles deregistered in the previous quarter and a month’s lag time for processing and computation, the number of COEs available for bidding will be based on a rolling average of deregistrations over the last two quarters.
LTA said in a press release that the move is "to reduce the quarter-on-quarter volatility of COE supply while being responsive in returning the COEs of deregistered vehicles to the bidding pool".
The change means that the number of COEs for the upcoming quarter, from August to October this year, will be half the number of vehicles deregistered from January to June this year, the LTA added.
The number of COEs for the quarter from November this year to January next year will be half the number of vehicles deregistered from April to September this year.
The new method of calculation will take effect for the next COE bidding exercise, which is scheduled to close on Aug 3.
Under the new method, the COE quota for August to October this year will be 10,581.
This means a monthly quota of 3,526 COEs spread across five categories, compared to 3,982 monthly for the three months from May to July, or a total of 11,951 across the period.
The 1,370 fewer COEs in the upcoming exercise is a drop of 11.5 per cent.
Still, in response to TODAY's queries, the LTA said that under the previous counting method, the COE quota for August to October 2022 would have been 9,394, or 11.2 per cent lower than the 10,581 announced.
The COE quota consists of three components:
- 50 per cent of the replacement COEs from vehicles deregistered in January to June this year
- Provision of 0.25 per cent per annum growth for Category C based on the Category C vehicle population as of Dec 31 last year
- Adjustments for changes in the taxi population, replacement of commercial vehicles under the Early Turnover Scheme, and expired COEs
Category C COEs are for goods vehicles and buses. Singapore has adopted a zero-growth policy for cars, but allows for a small increase in Category C vehicles.
The next quota announcement for the bidding period of November this year to January next year will be made in October.
COE premiums have been rising in recent months and prices for the Open Category, which is for any type of vehicles, hit a new high of S$114,001 on Wednesday as premiums rose across the board.
WHAT EXPERTS SAY
The move would help mitigate fluctuations by up to 20 per cent, said one industry expert, Mr Glenn Tan, president of the Motor Traders Association of Singapore.
"The current system has a possibility of large fluctuations of 20 to 30 per cent per quarter, whereas this new method would most likely smoothen the curve and make the fluctuations (fall) within 10 per cent, which on a forward basis, would make the quota over one year more or less similar, and reduce the need to bid aggressively in certain quota periods in advance of a huge pending cut."
Agreeing, Mr Rex Tan, the president of the Singapore Motor Cycle Trade Association, said that taking the average over a longer period would help to even out the spikes in COE supply.
When asked about whether the move would affect COE premiums, Mr Glenn Tan, who is also deputy chairman and managing director of Tan Chong International, a motor, property and distribution firm, said that it could even out buyers' demand.
He said: "With this change, the quota should be similar over the next 12 months, and bidders would possibly bid for COEs on a need basis, as opposed to collecting COEs in advance of a large cut to the quota to mitigate large price jumps when there is a large quota cut."
However, Mr Rex Tan said that while the new method of computing will mitigate fluctuations in the quota, which influences COE prices, demand remains "unpredictable".
He said: "Sometimes there are market players who may need a large fleet and depending on the purchasing and bidding pattern, it will then cause a spike in demand.
"Assuming all things (are) constant, it will reduce the rate of increase of the price as there is relatively more quota than it would be if based on deregistration in the last three months."