SINGAPORE: It is “unlikely” that car leasing companies, which bid for vehicles that are then leased out as private-hire cars, are the main factor for the increase in Certificate of Entitlement (COE) prices, said Acting Minister for Transport Chee Hong Tat on Monday (Nov 6).
This is because the data shows that COE prices “have gone up in a period when demand from car leasing companies has come down”, he said in parliament.
Addressing a range of parliamentary questions from Members of Parliament (MPs) about climbing COE prices, Mr Chee pointed out that these car leasing companies won about 21 per cent of Category A COEs in the last three quarters – and only 16 per cent in the most recent bidding exercise. In comparison, they won 27 per cent of Category A COEs in 2022.
In Category B, their winning bids also decreased from 24 per cent in 2022 to 23 per cent in the last three quarters.
The COE premium for Category B crossed the S$150,000 (US$111,000) mark for the first time in the latest bidding exercise on Oct 18, as premiums hit new highs for all car categories. Open category COEs, which can be used for any vehicle type but end up being used mainly for large cars, also rose to a record S$158,004 from S$152,000.
It was only a month prior that COE premiums in Category B and Open Category broke the S$140,000 barrier.
COE for Category A cars also closed at a record S$106,000 on Oct 18.
Related:
More COE quota will be brought forward from peak years in 'cut-and-fill' move to tackle supply trough
Private-hire companies deny bidding aggressively for COEs and pushing premiums up
Creating new COE category for private-hire cars will drive up costs for consumers: Transport Ministry
“TRADE-OFFS” TO CREATING SEPARATE CATEGORY
In response to MPs Gan Thiam Poh (PAP-Ang Mo Kio) and Yip Hon Weng (PAP-Yio Chu Kang) – who suggested hiving out a separate category for car leasing companies or treat them like taxis which don’t have to bid for COEs – Mr Chee said there would be “trade-offs” to implementing this measure.
Like taxis, the quota for this new category would have to be drawn from existing categories, given Singapore’s zero-growth policy, he said.
“As (private-hire car) demand is still evolving and could vary from quarter to quarter, it is difficult to ascertain what is the exact quota required to meet the needs of drivers and commuters. If we move too much of the existing quota from Categories A and B to this new category for (private hire car) companies, it will further reduce the supply in these categories and there is a risk that COE prices may spike further,” he added.
“On the other hand, if we do not move enough quota to the new category, drivers will end up with insufficient vehicles to rent and commuters could be affected by shortages in P2P (point-to-point) services.”
The Transport Ministry in September 2022 also noted that removing private hire cars from the usual COE bidding pool will ultimately drive up costs for consumers.
Nonetheless, Mr Chee on Monday said the government would study the possibility of “further options beyond COE bidding” to address these concerns with car leasing companies. It recognises that private hire cars “do travel longer distances on our roads but they also serve an important function in providing P2P services for Singaporeans”.
The demand for P2P services is increasingly met by private hire cars rather than taxis, he added. About two out of every three P2P trips are made by private hire cars as of September 2023, compared to three out of every five P2P trips pre-pandemic.
As of September 2023, the total private hire car population stands around 78,000. About two-thirds are chauffeured private hire cars, such as those from ride-hailing companies, while the remaining are self-drive private hire cars, including car-sharing vehicles.
About 53,000 people as of September 2023 hold a private hire car driver’s vocational licence (PDVL), which allows them to provide ride-hail services. Two-thirds of PDVL holders who made at least one ride-hail trip in September 2023 drive company-owned cars; the rest drive cars owned by individuals.
Related:
Commentary: Debate over COE system will go round in circles if we don't accept reality that car ownership is exclusive
Drop in COE premiums may see car buyers rushing in and pushing prices back up, say analysts
Along the same vein, MP Xie Yao Quan (PAP-Jurong) later proposed in a supplementary question to increase supply for Category A, which is mainly used for smaller mass-market cars, and decrease Category B supply. This would aim to benefit middle-income households who simply need to own an entry-level car.
Mr Chee noted the need to be “mindful of the trade-offs when we make such a move”, and said there is strong demand from Singaporean buyers for both Category A and B cars.
“It’s actually the same kind of complexities that I explained earlier about why there are trade-offs to having a separate category for private higher cars. Because then how do you decide how much to shift, to reallocate? And if you don’t do it correctly, you actually lead to more negative outcomes for everyone,” he said.
SPECULATIVE DEMAND
Addressing MP Saktiandi Supaat’s (PAP-Bishan-Toa Payoh) concerns over speculative demand, including by dealers, Mr Chee noted that it is “typically not in the interests of dealers to bid higher than what is necessary to win the bid”.
This is because they would have to absorb the higher COE prices since they have committed to certain sale prices for their vehicles.
“The large majority of bids for cars are clustered within a small range around the clearing price, with most bids being made within the final hour of bidding. This shows that bidders are closely monitoring the clearing price and making bids based on their willingness to pay, while not paying more than necessary,” he added.
As there are a number of restrictions in Categories A and B, the temporary COE “must be made in the name of the buyer and transfers are not allowed”. This temporary COE is valid for six months – if the buyer does not register a vehicle within this period, the temporary COE expires and the bid deposit of S$10,000 is forfeited.
The temporary COE validity period for the Open Category is three months – and vehicles in this category are registered on average within 14 days. Since June, only one Open Category temporary COE has expired.
Mr Chee added that the government will take enforcement action against dealers who make “false claims or misleading representations to consumers on the nature of their transactions”.
“For example, if they claim that consumers would have ownership of the motor vehicle with a 100 per cent loan with no downpayment, when in effect consumers are merely leasing it from them,” he said.
The government will also continue closely monitoring the COE market and introduce further measures to discourage speculative behaviour if necessary.
Editor’s note: An earlier version of this article stated that one Open Category COE has expired since January. The Ministry of Transport has clarified that it should be since June.