Revised CEVS and demand from ageing cars' owners buoying COE prices

Despite the generous increase in Certificate of Entitlement (COE) supply, most dealers are not expecting COE premiums to adjust downwards much, if at all, reported The Business Times. One major reason is the current scramble to procure a new car ahead of the refined Carbon Emissions-based Vehicle Scheme (CEVS), which will lower the carbon dioxide limits for rebates and surcharges.

Come 1^st July 2015, it is unlikely that the ordinary Cat A buyer will get to enjoy any rebate at all unless very much cleaner but still affordable models are introduced in the second half. Cat B buyers are also pressing dealers for timely registration because of the increased CEVS surcharges.

"Since the CEVS announcement, we have been seeing very 'unusual' behaviour from customers and we will probably see it until July," said Nicholas Wong, General Manager of Kah Motor, the authorised Honda distributor.

"This 'unusual' buying behaviour has caused the COE premiums for both Cat A and Cat B to jump by about S$10,000 in the last three bids. So despite a bigger COE quota, premiums may not drop by much. The only help is that they won't be pushed higher," added Mr. Wong.

Over at Opel and Chevrolet dealer Alpine Motor, General Manager George Lee believes that car prices may even creep higher. "I doubt COE premiums will drop due to strong replacement demand, and most 'normal' cars will cost at least S$5,000 more, some S$10,000. Prices may actually be higher than what they are today, and the evidence is from the recent bidding exercises. Also, S$5,000 forms 'a very small percentage' of today's total car price." He added, "The lack of a rebate will not deter buyers. Anyway, some dealers will probably sweeten the deal by absorbing some of the lost rebate."

But the General Manager for sales and marketing at authorised Nissan distributor, Tan Chong Motor Sales, Ron Lim, has a different view. He reckons that COE premiums may collapse after 1^st July. "Since the announcement about CEVS and zero percent vehicle growth, there has been strong demand from all consumers, not just replacement buyers. Some dealers have even committed to deliver the cars before July," he said.

According to Mr. Lim, the result is that COE premiums have been "artificially pushed up" and he does not think these levels are sustainable as the increases were "too sudden and too aggressive". He added, "The rebate is S$5,000, but the last increase was almost as much. It doesn't make sense, so there is a big question mark about where COE premiums are headed after 1^st July."