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With increased vehicle deregistrations in August and the return of quota of the suspended COE bidding, COE supply is set to increase for the upcoming quarter.

30 Sep 2020

COE premiums climb in September

In the most recent 23 September COE bidding exercise, COE premiums increased for Cat A and Cat E, while premiums fell slightly for Cat B compared to the first bidding round in September. Across the board, however, COE prices have all gone up compared to August. 

Premiums for Cat A, for cars up to 1,600cc in engine capacity and with an output of no more than 130bhp, increased by $738 (2.0%) and ended at $38,504 this bidding round. Cat A premiums have risen for four consecutive bidding sessions, and now stand at 19.3% above the 12-month trailing average.

Cat A premiums have risen for four consecutive bidding sessions
Premiums for Cat B, for larger cars with more than 130bhp or engine displacements larger than 1,600cc, fell by $521 (1.3%) and ending at $40,989. This marginal drop sees the premium for this bidding round settling into the 87th percentile of the 12-month trailing average

In Cat E, the open category, premiums increased by $211 (0.5%), closing at $41,001.

According to Nicholas Wong, General Manager of Kah Motor, "There were higher than usual total bids in the past couple of months, but these numbers are dropping steadily due to fulfilment of orders and cancellation for some dealers. New orders have not increased since then."

COE supply projected to increase by 8% for Nov-2020 to Jan-2021 period

COE supply is projected to increase by 8% for the upcoming Nov to Jan period
Based on statistical forecasting using latest data released by the LTA, and adjusting for the return of quota from the suspended April to June bidding exercises, the quota for the upcoming Nov-2020 to Jan-2021 period is expected to increase by 8% for passenger cars (excluding commercial vehicle and motorbikes). This is assuming Sept deregistration figures follow that of the past two months. 

For Cat A, COE quota is projected to increase 1% from the monthly average of 1,967. For Cat B, COE quota is projected to increase by 17% from the monthly average of 1,729. For Cat E, COE quota is projected to increase by 8% from a monthly average of 903. 

Passenger car deregistrations in August are 20% higher than the monthly average from the past three months
Passenger car deregistrations in August increased by 2.3% compared to July. As a result, monthly passenger car deregistrations in August are 20% higher than the monthly average from the past three-month period.

Mr. Wong added, "Deregistration has picked up compared to the previous quarter, and this could be a sign that we will be getting a slightly bigger quota in November."

While the COE quota is expected to increase slightly for the upcoming quarter, the continued outpacing of bids compared to the available quota will likely see COE premiums continue in its upward trend.

New car buying interest falls 

Compared to August, new car sales enquiries in September fell by 24%, according to SGCM's monitoring of sales enquiries
In September, there has been drop in showroom enquiries, based on SGCM's monitoring of sales enquiries to new car dealers. Compared to the previous month, sales enquiries in September fell by 24%. 

Alvin Khoo, 41, Musician, tells us, "I was in the market for a new car before COVID-19 hit. However, with these uncertain times, I don't know if I'll even have a job in the next month. Holding back on big ticket items like a car purchase is what I'm going to do for quite a long time to come."

Jonathan Tan, 33, Marketing Assistant Manager at a healthcare firm, also tells us, "The new car market is pretty exciting with a whole slew of different models available to choose from. I believe that it's a buyer's market now because of just how competitive it is out there. But my reservations remain the same, with cost of COE the biggest reason for taking a 'wait and see' approach." 

If this suppressed consumer interest continues, it will place some downward pressure on COE premiums across the board. 

Minimal new car price adjustments amongst dealers 

More than 60% of dealers did not adjust their car prices after the most recent COE bidding round
After the latest COE bidding, there was minimal price adjustments across a selected panel of new car dealerships monitored by sgCarMart. Considering COE premiums changed by less than $1,000, this is to be expected.

More than 60% of dealers, including brands such as BMW, Hyundai and Mazda, did not adjust their new car prices for both Cat A and Cat B models. 

Some other dealers did make some price adjustments. Kia and Renault increased prices for Cat A cars by $1,000, while Nissan and Subaru increased Cat B car prices by $1,000 and $4,000 respectively. Only MINI reduced the prices of its Cat B cars by $1,000.

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