MOTOR trade associations representing hundreds of car dealers are doing the unthinkable: petitioning the Government to cut certificate of entitlement (COE) supply in the wake of plunging prices.
The Singapore Vehicle Traders Association and the Automotive Importers and Exporters Association said nosediving COE prices - which culminated in a crash yesterday - will drive down the cost of new cars, killing the market for second-hand vehicles.
Mr Neo Nam Heng, president of both trade associations, said the sector is heavily reliant on used car sales and reducing the number of COEs is necessary to "save the industry from collapse".
He said motor traders attended an emergency meeting yesterday and agreed to petition "all relevant ministries, as well as the Prime Minister" to reduce COE supply.
While they acknowledge that reducing COE numbers means lower new car sales, Mr Neo said "it's a worthwhile sacrifice".
"If the used-car trade collapses, we won't be able to sell new cars," he said, explaining that buyers usually have a used vehicle to trade in.
Yesterday, the COE premium for cars up to 1,600cc crashed to $2, down some $10,000 from the last round two weeks ago.
The price is the lowest since the quota system was introduced in 1990.
The COE price for cars above 1,600cc plunged to $4,889 while that for the open category COE, used predominantly for cars, landed at $6,889. Both are sharply lower than the year's average of around $14,000 as the worsening financial crisis shakes consumer confidence.
The two trade associations, which have about 450 member companies, are proposing cutting the car COE supply by 25 per cent, to make bidding more competitive and to help stabilise premiums at $10,000 to $15,000.
The associations want the cut to be immediate and last for six months.
Asked why they could not wait till next April, when COE supply is expected to shrink anyway, Mr Neo said: "It will be too late."
Used-car dealers hold an estimated 3,000 vehicles in total.
The two motor trade associations are making a few other appeals as well.
One is to reduce the goods and services tax to 3 per cent, from the current 7 per cent.
They suggested that the reduction last one year to help stimulate buying.
They also suggested making the transfer fee the Government charges each time a car changes hands "fairer".
The fee is now a percentage of the vehicle's estimated market price, which Mr Neo said works out to $3,000 to $4,000 for a Mercedes E-class.
He said basing the fee on the car's open-market value - its price before registration taxes and COE - is better.
"A car is already taxed when it is first registered. Why tax the taxes when it is resold?"
Another proposal is to allow cars less than three years old to be used as taxis.
This would help lift the used-car trade as well as "let Singapore have taxis that are cleaner than the diesel cabs we have".
This article was first published in The Straits Times on Nov 20, 2008.
THE COE premium for small cars plummeted yesterday to a record low $2, from $10,455 just a fortnight ago. Premiums for all other categories also ended sharply lower as demand for new vehicles tanked in tandem with the economy.
As the tender closed at 4pm yesterday, the certificate of entitlement to buy a car with an engine size up to 1,600cc ended at its lowest ever since the quota system started in 1990.
But it did not take market watchers completely by surprise. Ms Lisa Lee, a senior analyst at Nomura Singapore, said: 'It just shows demand is drying up. People are getting more cautious.
THE certificate of entitlement (COE) premium for small cars has plummeted to an all-time low of $2, from $10,455 the previous month.
The Land Transport Authority received 1,852 bids for this month's Category A (taxis and cars below 1,600cc) COE - just one bid over the quota of 1,851.
Parallel importer Hans Tan said he and fellow traders were astonished at the drop.
Premiums across other categories were down by at least 30 per cent - $8,301 to $4,889 for Category B (cars above 1,600cc), $6,189 from $8,889 for commercial vehicles, $1,012 from $1,509 for motorcycles and $6,889 from $10,490 for the open category.
While prospective car buyer J.Y. Chiang, 38, was shocked, she was also relieved, because she had pulled out from the bidding exercise for a COE for a coveted Honda Fit - a 1,300cc car - at the 11th hour.
"My car dealer had pegged the COE at $10,000 and was offering me a car package which was not eligible for rebates. If I'd signed, I would not have been refunded the huge difference," said the university instructor.
