This Is Why COE Prices Have Been On The Decline In Singapore
Image source- The Strait Times
A Certificate of Entitlement or COE is a vital license for anyone embarking on a vehicle ownership journey in Singapore. The way the COE license system requires Singapore to participate in price auction bids so that they can be granted the right to own, register, and even drive the car. The license lasts for a duration of 10 years.
The COE prices are intentionally hiked, and so is the cost of vehicles in Singapore as means of controlling the number of vehicles on Singapore roads. This is done to reduce traffic congestion and also to reduce vehicle emissions. Interestingly, the COE prices have been on the decline, with February’s COE prices hitting the lowest levels in a decade.
COE performances in the latest bidding exercise
Image source- DirectAsia
To put the COE decline into perspective, the prices for vehicles with bigger-capacity engines dropped to S$30,890 during the bidding exercise held on February 5. This is a significant decline from the S$37,705 bidding price at the previous COE bidding event. The bidding price for vehicles whose engine capacity is lower than 1600cc closed at S$30,010 during February 5’s bidding event, which was also lower than the S$35,010 closing price at the previous bidding event.
COEs in the open category dropped from S$37,500 in the previous session to S$34,900 in the February 5 bidding session. These are COEs that are mainly used for large cars though they can be used for any vehicle. The lowest COE recorded was S$26,389, which was recorded in 2010’s first bidding session. The only COEs that saw a notable increase in February’s bidding exercise were those of commercial vehicles. They rose slightly from S$25,001 to S$25,013, although that was a rather negligible rise but a gain nonetheless. Even COE premiums on motorcycles dropped from S$4,610 in the previous session to S$4,401 in February’s session.
What is the rationale behind the falling COEs?
Industry experts believe that the declining COEs may have something to do with the latest emission standards. One of the main aims of using high COEs is to discourage the purchase of motor vehicles. However, the Vehicular Emissions Scheme (VES) implemented on January 1, 2018, requires new vehicles in the market to have particulate filters, thus reduced emissions.
The government may thus be reducing the COEs because newer vehicles are more efficient and less dangerous to the environment as far as the emission levels are concerned. It may also be one of the tactics to encourage people to purchase the newer types of vehicles that come with particulate filters.
There is another potential reason behind the falling COEs. Vehicle buyers might be holding off their bids to try and see if the COEs will drop further, especially with the implementation of the new VES. Things are starting to settle down after the implementation of the VES, and industry players are also eager to see how things will turn out, and especially how consumers will react to the changes.
Mr. Raymond Tang of the Yong Lee Seng Motor used car dealership stated that used vehicle dealers have also been withholding their bids in the hopes that COEs will continue to drop. Mr. Tang, however, believes that prices will either increase or they will remain the same.
The Coronavirus outbreak may also be a factor
Image source- BBC
Unfortunately, the coronavirus threat is real, and it is affecting businesses across the world. It is worth noting that the drop in COE prices in February coincides with the rising concerns over the spread of the coronavirus, which has resulted in unfavorable consumer sentiments. Many industries and countries across the world have experienced slow business due to health risk. Some businesses have already shut down, and the fabric of our social order has already been disrupted by the need to quarantine ourselves in the hopes that the viral threat will be subdued.
Unfortunately, the vehicle sales industry in Singapore is among the industries that have taken a hit. People are just not purchasing automobiles because there are far more pressing matters, such as the need to protect themselves from contracting the Covid-19 virus. As you may imagine, people do not want to be in the outdoors very much, and neither are they particularly interested in traveling much. Purchasing a car is thus not in many people’s interests at the moment.
Will the situation improve?
Prime Motorgroup chairman Mr. Neo Nam Heng noted that the market has been quiet, and he expects things to get worse. He also believes that the COEs may have dropped further if it were not for the support received from January’s motor show in Singapore. This means that we may see further declines in the COEs if the coronavirus situation is not remedied in the next few months. The current outlook is not looking any better, so we might see further COE decline in the near future.
The COE seems to be following a trend
This is not the first time that COEs in Singapore have declined due to a viral outbreak. There was a similar scenario in 2003 during the severe acute respiratory syndrome or SARS outbreak, which fueled a significant drop in the COE prices. It also led to a 30 percent decline in the use of public transport means. In other words, people opted to use private means to reduce the chance of catching the virus.
A similar situation is also expected now that there is a new viral outbreak, AKA coronavirus. Some experts believe that the new outbreak of COVID-19 will result in a similar situation where people will likely avoid public transport. In other words, this situation might have a potential upside where it might encourage people to purchase private vehicles to avoid crowded public transport.’
There is a lot currently going on in Singapore and the rest of the world. Consumer habits have changed, and industries, including the automotive industry, are also experiencing disruption. These factors and many others might be contributing to the declining COEs, and it is not clear how long this will continue.