CERTIFICATE of entitlement prices saw modest increases yesterday, though there were fewer COEs up for grabs in the first tender of a reduced supply.
Coupled with the fact that the exercise came after a three-week break - longer than the usual two-week intervals - the modest increase in premiums shows that the market for cars is weak, said traders.
A longer gap between tenders usually means significantly higher premiums, as traders have a bigger backlog of orders.
Mr Gavin Yeo, commercial director of Toyota agent Borneo Motors, one of the largest COE bidders here, said that under normal circumstances, COE prices would have risen more.
'It's just so much bad news, which has caused people to be more prudent,' Mr Yeo said, referring to the crises which have rocked global money markets in the past few weeks.
COE prices for cars up to 1,600cc even ended 2.1 per cent lower at $13,801 - even though demand was boosted by 700 unsuccessful bids carried over from the previous tender.
The COE premium for cars above 1,600cc rose by 8.3 per cent to $14,400, while that for the Open COE category, traditionally used mainly for cars, crept up by 1.1 per cent to $15,058.
Mr Neo Nam Heng, president of the Singapore Vehicle Traders Association, said the strong Japanese yen, which has an impact on the majority of vehicle importers here, helped to dampen the results.
The yen has gained over 10 per cent in the past month, to trade below 70 yen per $1 now. This has raised the cost price of cars by between $3,000 and $4,500, Mr Neo noted.
Still, premiums for bigger cars rose because their better profit margin allows sellers to bid more aggressively for certificates, he said.
Sellers of commercial vehicles had to bid more aggressively too, but for a different reason. They had 30 per cent fewer COEs, as their quota bore the brunt of the cut in COE supply. This sent the premium for buses, trucks, vans and lorries up by 6.8 per cent to a six-month high of $15,899, making it the priciest COE now.
'Open COEs will also be used for commercial vehicles from now,' Mr Neo said, noting that premiums for cars and trucks are now 'quite uniform'.
Historically, COEs for cars are far costlier than those for commercial vehicles because cars cost significantly more, and car sellers have fatter margins.
Motorcycle COE prices soared 21.6 per cent to $1,889, one of the highest levels ever for this category. Observers attribute this to the quota cut, as well as a pick-up in demand from potential car buyers who have been put off by higher fuel and parking charges.
Looking ahead, traders do not expect the global economic turmoil to affect the Singapore vehicle market too much.
'Luckily, we have the COE system, where old cars need to be replaced,' said Mr Neo. 'So the market will not collapse.'
Indeed, he pointed to the financial crisis of the late 1990s as one example. 'Singapore had negative growth then, but COE prices were quite high.
'We have a special system, a machine that keeps the industry moving.'
This article was first published in The Straits Times on Oct 9, 2008.
COE (Certificate of Entitlement) premiums increased across the board in the latest October open bidding exercise. Only premiums for Cat A (cars 1,600cc and below) dipped to $13,801 - a 2.1 per cent decrease compared to last month's premium of $14,100.
Premiums for motorcycles (Cat D) gained the strongest by 21 per cent - it finished at a high of $1,889 as compared to $1,554 last month.
Prices for Cat B rose by 8.3 per cent to $14,400.
Cat C premiums showed a similar increase of 6.8 per cent to $15,899 as well.
Cat E premiums experienced a negligible increase of 1.1 per cent - it finished at $15,058 from $14,889 last month.
Demand seems to be largely unaffected by the financial crisis as there were plenty of unsuccessful bidders in every category.
This was the first tender of the reduced quota as announced by LTA last month.
