Boston, MA -- (ReleaseWire) -- 04/15/2014 -- The Certificate of Entitlement (COE) bidding exercise on February 5 2014 was the first COE auction since the formal adoption of the revised COE category criteria (see 'New COE Regulation Could Reverse Sales Trends', September 17 2013). The outcome of the bidding, however, elicited surprise among some motor traders.
As the accompanying table shows, prices of Category A COEs dipped only slightly from the previous bidding round, to SGD71,564. This was unexpected as 30 models previously in Category A have migrated over to Category B, which would logically mean fewer bidders in Category A. Indeed, car dealers had expected the premium for small cars to drop to between SGD60,000-65,000.
This latest bidding round demonstrates that the tweaks in the COE system are not having the desired effect intended by policymakers. The new regulation, which now includes brake horsepower (bhp) as an additional criterion in the COE category, was introduced to level the playing field for mass market cars in Category A by removing premium brands from that category. Ultimately, the revisions were made to make cars more affordable for middle-class families.
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While, it is still too early to see these results and judge the revised policy to be ineffective, given that prices of Category A COEs may yet fall further in the coming months, we highlight several factors, which may create additional headwinds for small car buyers.
- Some Premium Brands Still Under Category A
- Loan Curbs Have Seen Some Buyers Downsizing
In 2013, luxury brands once again enjoyed a strong finish. With many of these premium carmakers introducing models, which still come under Category A even after the new COE rules, we could see them continue to retain the top spots for 2014.
High Cat A Prices Reflect Dissatisfaction With Public Transport
We also see the strong demand for Category A vehicles showcasing the rising dissatisfaction with public transport among Singaporeans. Broadly speaking, there are two main forms of transport available in Singapore - public and private transport. Within private transport, the main categories are motorcycles, small cars and big cars. The strong demand for small cars suggests to us that some people taking public transport have now decided to spend the extra money and make the switch to private transport. This is not surprising given the increasingly overcrowded state of Singapore's buses and trains during peak hours, coupled with the inconvenience stemming from occasional train faults and breakdowns. While motorcycles do remain another cheaper option, safety and practicality concerns make small cars more attractive to these consumers, as they also increase the convenience factor for families.
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