The Road Towards Re-Tuning the COE System

A few weeks ago, the government announced a further cut by 12.7%  in the COE quota for the next 6 months. Cat A cars were hardest hit. This drove COE premiums up again and Cat B crossed the $90,000 barrier. This 6-months review, but with a impending trend of decreasing the  growth rate of the car population since a 2010 Transport ministry rethinking, caused consternation among those who want to buy cars.

Then in another surprise but welcomed recent move, the Transport ministry changed gears on another policy. Taxi companies cannot bid for new taxis under Cat A and have to compete in Cat E instead. This is a good move advocated by many others before and the government should be lauded for making a u-turn, suggesting that it was wrong recently on this policy and responded to public feedback finally.

Taxi companies have deeper pockets and thus place higher bids to secure the fleet they want, pushing out individual car buyers. All things equal, Cat A is now the racing ground for the various dealers, although the odds are in favour of dealers in continental cars since the prevalent thinking among car buyers is to buy cars with a higher OMV as there is more “value” since the COE is so high.

The COE is not a perfect system and more tweaks can be done to make it less imperfect, assuming that the government is stubbornly stuck on its road in controlling car ownership rather than car usage, which is a better approach. The next move the Transport ministry should make soon is change the bidding system to a pay-what-you-bid instead of the current pay-the-lowest of the successful bids. That would level the racing field even more on who gets the bid and car, and minimise dealers who are willing to bid high and secure a car for their customer e.g. a hypothetical $100,000 bid for a Cat A COE while guessing that the eventual bid next week would be $70,000 or so.

In a week’s time after the next COE bidding exercise, we can see if displacing the taxis from Cat A to Cat E would signal a sustained dip in COE premiums for Cat A.  I don’t think one sparrow makes a summer as more COE bidding exercises are needed to gauge the extent of the success of the policy. Nevertheless, it looks optimistic ahead in the next 6 months for Cat A car buyers.


2 responses

  1. Pingback: Daily SG: 2 Aug 2012 | The Singapore Daily

  2. Alan

    Potential car buyers should wait until the next GE approaches, PAP will damn sure make it such that COEs will be more “affordable” then. Otherwise the only consequence will be the GE results will not end up ‘affordable’ to PAP election candidates.

    The squeezing of the COE quota now is only part of the wayang so that later they can show that they care. The voting power of mid-income families will be too perilous for PAP to ignore.

    August 2, 2012 at 10:16 pm

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