Fewer COEs for cars, more for commercial vehicles

This article is more than 12 months old

In the commercial vehicle category, COE supply goes up by 7 times

Car buyers will have fewer certificates of entitlement (COEs) in the next three-month quota, starting from May.

On the other hand, motorcycle and commercial vehicles buyers will have significantly more COEs to bid for.

The new quota for commercial vehicles is nearly seven times that of the current one, according to figures released by the Land Transport Authority yesterday.

For cars up to 1,600cc and 130bhp, the monthly COE supply will shrink by 7.5 per cent to 3,797. For those above 1,600cc or 130bhp, it will dip by 2.7 per cent to 2,641 a month while Open COEs will grow by 9.6 per cent to 1,055 a month.

Open COEs can be used for any vehicle type but tend to end up with bigger cars. The number of COEs in the three categories combined is 3.7 per cent lower than today's.

Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, said the decline is partly to do with motorists extending the life of their 10-year-old cars instead of scrapping them. They began doing so two years ago.

Also, from next month, the Open category, which is made up of a 10 per cent contribution from each of the other COE categories, will no longer include that from motorcycles.

This will be good news for small and medium enterprises. It’s time for them to replenish their fleets. Mr Neo Nam Heng, chairman of diversified motor group Prime, on the correction in COE prices for commercial vehicles

The exclusion is part of a move to cool the motorbike COE premium, which has more than trebled in the last three years. From next month, the monthly supply for motorbikes is 907, a 31.1 per cent rise over the current level.

But the biggest increase is in the commercial vehicle category, where the monthly COE supply will soar from 322 to 2,168, a rise of 573.3 per cent.

The jump had been anticipated as a huge population of vans, trucks and lorries have reached their 20-year statutory lifespan.

The phenomenon arose in 2006, when a crash in COE premiums led many owners to renew the COEs of their commercial fleets. The plunge was triggered by an earlier-than-expected introduction of the Euro 4 emission standard.

Mr Neo Nam Heng, chairman of diversified motor group Prime, does not foresee a huge impact on car COE prices.

Demand from private-hire vehicle fleet operators "has dropped", he said, adding that there is now a surplus of such vehicles waiting to be hired.

But he expects "a huge correction in COE prices" for commercial vehicles.

"This will be good news for small and medium enterprises," he said. "It's time for them to replenish their fleets."

In the latest tender yesterday, COEs for two-wheelers remained robust, at $7,589, despite a government probe into alleged COE speculation by a group of motorcycle dealers.

Industry observers said it should ease from next month because of the increase in supply. COE for cars rose yesterday, with all three categories now at their highest in five months. (See table below.)

Dealers said the increase was due to a push to clear stocks ahead of Euro 6 standards taking effect in September and models that will be penalised when the new Vehicle Emissions Scheme starts in January.