Published December 4, 2008

COE premium jumps after rash of orders

Lower prices did the trick but demand for new cars is expected to soften again

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(SINGAPORE) As expected, the COE premium for small cars rebounded sharply from its historic low of $2 a fortnight ago.

After poor demand had led to the premium for a certificate of entitlement (COE) in Category A - for cars below 1,600cc - crashing by more than $10,000, motor distributors slashed new car prices by up to $5,000 to $7,000 for popular models. This resulted in a rash of bookings, and prices subsequently went back up ahead of yesterday's bidding exercise.

In fact, business over the last two weeks was said to have been so good that the authorised distributors of Toyota and Honda - the top two brands here - garnered over 1,000 orders each, or more than double what they would normally expect during a two-week period.

'Sales have been brisk since the $2 COE result, and the market reacted accordingly with most people booking a Cat A car,' said the manager of a popular Japanese dealership.

The large number of bids - 3,149 - received for the 1,840 Cat A COEs available was a good indication of the interest level. Two weeks ago, there were only 1,852 bids for 1,841 COEs.



In yesterday's tender, Cat A jumped $7,719 to $7,721. Cat B - for cars above 1,600cc - rose $1,612 to $6,501, while Cat E - the open category - edged up $700 to $7,589.

Meanwhile, Cat C - for commercial vehicles - was the only category to register a fall. It shed $977 to end at $5,212. Cat D - for motorcycles - inched up $90 to $1,102.

Looking ahead though, most motor traders believe demand will soften again as car prices are hiked after this latest round of premium increases. The industry is expected to adjust list prices upwards by $3,000 to $4,000 for Cat A models, and $2,000 to $3,000 for Cat B models.

'Orders had been dwindling since distributors started raising prices a week ago,' said the manager. 'Now with the COE results, they should dwindle some more.'

Before last fortnight's $2 premium, the lowest for a Cat A COE had been $101 in June 2001. But the super-low premium was not a windfall for all 1,840 successful bidders. Some customers of parallel importers (PIs), for example, did not get a COE rebate.

'A PI's car price is usually quoted without a COE rebate, so some PIs refused to give any,' said a senior executive with a local dealership. 'But you can't say they are in the wrong because they are not required by law to give any rebates.'

He added that some PIs did relent and returned some cash to their customers out of goodwill. But there were others that did not.

Some off-peak car (OPC) buyers were also wrongfooted by the $2 COE. They could not qualify for the full $17,000 rebate because of their cars' low open market value (OMV).

The $17,000 rebate is made up of the 100 per cent ARF (additional registration fee) and COE.

Because of this, some OPC buyers were asked to top up the car price by a few thousand dollars.