COE prices likely to rise as vehicle growth rate cut to zero: Experts

COE prices likely to rise as vehicle growth rate cut to zero: Experts

SINGAPORE: As Singapore's vehicle growth rate is reduced to zero per cent, transport analysts said they expect Certificate of Entitlement (COE) premiums to go up.

The Land Transport Authority announced on Monday (Oct 23) that Singapore will stop adding private passenger cars and motorcycles to its roads, dropping the vehicle growth rate from 0.25 per cent to zero per cent, in its latest push towards a car-lite society.

Singapore University of Social Sciences transport economist Walter Theseira told Channel NewsAsia that the freeze in vehicle growth rate will lead to an "upward pressure" on COE prices.

"It's entirely logical that when you have an increasing population and increasing affluence in Singapore, and if demand for private transport on a per capita basis remains exactly the same, the only conclusion is - prices will go up," he said.

COE premiums were between S$41,617 to S$52,000 for cars and S$4,903 for motorcycles in the last COE bidding exercise on Oct 19.

National University of Singapore transport researcher Lee Der-Horng said that in Singapore, the desire to own a car is "still very strong" even as supply is cut.

"The supply of COEs comes from two things: One is de-registering the vehicle, another is the maximum allowable net growth of vehicles," Dr Lee explained.

"Now they are removing (the latter), which means in the future, it will be solely dependent on the number of de-registered vehicles. So these two factors will come together and contribute to a market that has low supply of COEs."

The shift towards a car-lite society is made even more difficult with public transport reliability issues, Dr Lee said.

"Given our rail system that breaks down from time to time, with certain re-engineering works still ongoing, I think people may not buy the suggestion that I can get rid of my car and just switch to public transport," he added.

Similarly, Dr Theseira said for certain groups of commuters, owning a car may be more convenient.

"For example, if you're working on Jurong Island, it's still extremely difficult to ... get there by public transport," he said.

"There are still a lot of concerns about how friendly public transport is for families with very young children, overcrowding and whether it is safe for the elderly who are not very capable.

"You can always reduce the supply of vehicles, but if you don’t have the necessary improvement in public transportation, what you will produce at the end of the day is a large number of disgruntled commuters."

Still, Dr Lee said the abundance of private-hire services and an upcoming car-sharing programme may mean people will be more willing to move away from self-driving.

"WRITING ON THE WALL": CAR DEALERS REACT

Singapore Vehicle Traders Association honorary secretary Jeremy Soh said the move to slash vehicle growth was expected.

"The writing's already on the wall for the past few years, so I don’t think it comes as a surprise," he said. 

"The cake is not going to get any bigger; it will stay the same size. So, car dealers will have to start looking outside what they are naturally doing."

CarTimes Automobile managing director Eddie Loo said that car dealers will have to diversify their operations, and pointed to how the Government has been trying to improve public transport and promote car-lite districts.

He will be focusing more on after-sales services, like workshop repairs and insurance renewals. Going into car rentals is an option too, he said.

"It’s not a choice, so we are also moving into the online business," he added. "Like trying to be a consultant or service provider. This is what we are banking on."

While Dr Theseira said car dealers could benefit from a rise in COE prices, Mr Loo said sudden fluctuations in the market may lose car dealers a lot of money.

"When we sell one car, we might run into losses if it spikes unexpectedly," he mused. "We are the only country that sells new cars without knowing how much profit you are going to make."

However, Mr Soh said the move might remove such speculation in the future, because "the supply of COEs will essentially become a one-for-one replacement".

"You will know that for cars turning 10 years old, if they don’t renew their COEs, they're going to be scrapped. So, the COEs will go back into the system," he said.

"That means in terms of forecasting, you might see some certainty, rather than always having to second guess what's going to be the next tranche."

Source: CNA/hz

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