Car dealers not expecting spike in COE prices despite drop in annual quota
By Asha Popatlal, Channel NewsAsia | Posted: 14 February 2009 2248 hrs

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SINGAPORE: While the annual Certificates of Entitlement (COE) quota for this year has been cut by 24 per cent, in line with the government's move to lower the annual vehicle growth cap, car dealers are not expecting a huge spike in COE prices just yet.

In the past, whenever a large cut in the number of COEs available is announced, there would be a large turnout at car showrooms, as people expect prices to go up.

But this time, with the economic downturn deepening, car dealers say they have seen only a small increase in numbers as many are adopting a wait-and-see attitude.

Ron Lim, Sales and Marketing general manager of Nissan said: "Right now at this point, consumer is still waiting for the reaction on the actual COE prices when the new quota kicks in. I think overall, people are still very cautious. They'll come in gradually and slowly take their time to evaluate the situation."

While COE prices are expected to rise between now and the end of the year, car dealers say they do not expect the increase to be significant. Rather, they say it is expected to increase gradually, reaching anywhere between S$3,000 and S$8,000 by year-end.

Part of the problem, of course, is tight financing.

Glenn Tan, Group chief executive of Motor Image Group said: "Basically, when they say ‘I want to trade in my used car, how much can I get?’ - the value is almost nothing because the export market is practically dead.

"A lot of people used to export to European markets, but right now there is no demand for these cars. So if they cannot clear, they have to sell it to local market.

"But those days when COE was S$30,000, the value owing to the bank is larger than the market value of the car now, because the COE is so cheap. So no one can even afford to sell their cars."

As long the situation continues and people are not able to sell their used cars, dealers expect the situation to remain bad, especially for smaller cars - a category which recently saw COE figures plunge to a historic low of S$2.

- CNA/yb