Record motorcycle COE prices driven by bidding rush before impending quota cut, say dealers

SINGAPORE — This week's jump in Certificate of Entitlement (COE) prices for motorcycles was a case of motorcycle dealers anticipating a further price hike when the COE quota is cut next month, the dealers said on Friday (Oct 21).

These dealers often buy COEs for motorcycles in advance, and sell them together with motorcycles as a package deal.

Motorcycle buyers were also struggling to afford the sky-high COE prices, with some taking out longer-term loans than previously while others were choosing to get their old bike repaired to keep it going longer, the dealers added.

And while changes were made to the bidding process for motorcycle COEs in March, these steps would have done little to cool the market as speculative bidding of COEs has not been a major issue for some time, they said.

On Wednesday, motorcycle premiums rose 8.9 per cent to set a new high of S$12,801, breaking a record set in the earlier tender this month. A COE is needed to own and operate a vehicle in Singapore.

It was the last bidding exercise under the current COE quota across all vehicle types including motorcycles. For the November to January quarter, the supply of COEs will shrink by 13.7 per cent.

“Once you hear the announcement of the curb in quota, everybody will be thinking, ‘Prices will go up, let’s secure some for ourselves’,” said Mr Norman Lee, a director at motorcycle shop Race Werkz Motor Sports. “It’s definitely a supply issue.”

Unlike in the car market, motorcycle dealerships tend to bid for a COE before securing a buyer. 

In the March changes, the Land Transport Authority (LTA) raised the bid deposit for motorcycle COEs from S$200 to S$800 and halved the validity of a temporary COE to three months. It said the move was to “encourage prudent bidding behaviour”.
For some dealers, the move was seen as a way to curb speculation. If a dealer expects COE premiums to go up, they could hoard certificates earlier at a cheaper price. 

The changes, therefore, give bidders who are buying on a speculative basis a shorter time to secure a buyer. It also makes it more costly if a dealer fails to find a buyer, since the deposit will be forfeited.

Mr Rex Tan, president of the Singapore Motor Cycle Trade Association, said however that there is no evidence of rampant speculation on motorcycle COEs.

In the past, the motorcycle category had the highest proportion of unused COEs, suggesting that dealers were accumulating COEs and failing to find buyers, he said. “Now, it’s not the case,” he said.

From May to September 2021, the utilisation rate for motorcycle COEs successfully bidded for was over 99 per cent, Transport Minister S Iswaran said in parliamentary reply in April this year. These certificates had the longer six-month validity before the bidding process was changed in March this year.

Over the past two years, motorcycle COE premiums have been on a relentless climb alongside premiums for other vehicle categories.

In March 2020, the last bidding before COE biddings were suspended for three months owing to the Covid-19 pandemic, motorcycle premiums were S$4,489. 

When bidding resumed in July that year, they jumped to S$7,702 and have climbed fairly consistently since then, smashing record after record. At S$12,801, the premiums are now about three times as high as an entry-level motorcycle.

Mr Lee said he had expected a market correction when society returned to normal after Covid-19. 

“We haven’t seen that,” he said. “It’s not sustainable. Motorcycles are never a luxury item. It’s crazy.”

HIGH PRICES A CONCERN: MP

Mr Saktiandi Supaat, Member of Parliament for Bishan-Toa Payoh Group Representation Constituency, said that the high motorcycle COE prices are a concern, especially for delivery riders and people who depend on their motorcycles for their livelihood.

Still, he said he has not seen large numbers of his residents highlighting the high premiums as an issue as yet. 

Mr Saktiandi chairs the ruling People’s Action Party’s Government Parliamentary Committee that scrutinises legislation and programmes of the Ministry of Transport.  

“We need to constantly see whether we can help,” he said. “We’re not sure what’s fully driving the price… we need to see what are the main drivers and whether this continues to the end of the year and into next year.”

Mr Tan, who also runs motorcycle services firm Ban Hock Hin, said that he has lately been seeing motorcycle buyers take up loans with longer terms of up to seven years, compared with about five years in the past.

Unable to afford new motorcycles, some of Mr Lee’s customers are refusing to replace their old motorcycles and insist on getting them repaired.

“Even though they know their motorcycle is failing, they tahan,” he said, using the Malay word for “endure”.

In response to queries by TODAY on whether it had further plans to cool the market, LTA said that it had "not observed any anomalous bidding behaviour and will continue to monitor the situation on the ground closely".

It added that around 99 per cent of Cat D temporary COEs obtained from July 2021 to June this year had been utilised to register motorcycles and this suggested a genuine sustained high demand for motorcycles.