From what I've read, the Government is still committed to paving new roads at Bukit Brown area, amid protests.
And recent news also mentioned that the roads around the future Sports Hub would be enhanced and widened.
To me, all these point to signs that the Government still wishes to accommodate a decent car population, to be balanced against "unsustainable" growth. Go figure!
(04-10-2011, 10:06 AM)cif5000 Wrote: 1. First, let's agree that a lower growth rate is actually bad news for Vicom.
2. Older cars = more frequent inspection?
The way I see it, the number of inspections a car has to make is fixed over its lifetime (because COE = 10 yr). The proportion of cars > 3yr will normalize (read d.o.g. previous post) eventually.
3. More cars are getting older?
All cars are getting older everyday. More cars are getting older primarily because there are more cars to begin with.
Obvious aside, according to LTA stats, the number of cars entering mandatory inspection will decrease in the next few years compared to the previous years.
Thanks for your points. An engaging discussion indeed!
Agree that a lower growth rate means less cars on the roads in future years.
I guess with the evidence you presented, it may mean VICOM has hit a "plateau" with respect to number of inspections. I guess the way forward for them to make more revenues and profits is to increase the price per inspection, or to focus more resources on building up their non-vehicular inspection arm.
A lower growth rate will still mean more cars on the road, except that the number is not growing as fast as before.
From the horse mouth when asked to increase price during one of the AGMs, "this is a god-send business, and we do not want to make god angry". So much for their pricing power.
On the other hand, the mandatory inspection can always be amended for whatsoever justifications. e.g. to control unauthorized modifications, all cars including those below 3 yrs old will have to be inspected...
im not entirely familiar with vicom's business model, but do all these certification, testing and inspection business employ a high operating leverage business model? i.e. all your special instruments, machines, centres etc are all fixed cost. if that's the case, i presume top-line growth would be very important since the portion of your fixed cost is large. any drop in revenue would have quite a big impact on your bottom line.
if setsco makes up 2/3 of their business, i guess we should pay more attention to it. are they the top non-vehicle testing and inspection name in singapore? what is the barriers of entry to this industry like? is it difficult for others to get in?
(04-10-2011, 03:41 PM)wozhaodaole Wrote: im not entirely familiar with vicom's business model, but do all these certification, testing and inspection business employ a high operating leverage business model? i.e. all your special instruments, machines, centres etc are all fixed cost. if that's the case, i presume top-line growth would be very important since the portion of your fixed cost is large. any drop in revenue would have quite a big impact on your bottom line.
if setsco makes up 2/3 of their business, i guess we should pay more attention to it. are they the top non-vehicle testing and inspection name in singapore? what is the barriers of entry to this industry like? is it difficult for others to get in?
the industry i work in has some certification/testing stuff and hence maybe i give my 2cents worth here: In this biz, the fixed costs are already there as u need the manpower/instrumentation to perform them. But the good thing is, all the buildings/instructments most probably require a periodical certification (eg. yearly calibration or testing for cracks) and that's where recurring business comes in. So in a sense, once the construction boom is over, it will still earn a staple income from SETSCO, like how it is doing so with car inspection.
I believe Vicom experienced its top line growth in the previous construction boom. I am not optimistic it can continue to do so. But from a dividend play standpoint (low payout ratio, staple biz with competitive moat), it is an excellent one.
The Straits Times
Oct 14, 2011 Shopping for new car? Expect high prices next year
By Christopher Tan
SINGAPORE'S vehicle population growth rate is likely to fall within the prescribed ceiling this year - the first time since 2004.
Going by estimates based on vehicle population figures in the first eight months of the year, there will be about 954,000 vehicles on the road by year-end, 0.9 per cent more than last year.
The increase would be well within the 1.5 per cent growth cap implemented during the 2009 COE quota year.
Before 2009, the allowable annual growth rate was 3 per cent.
It was the halving of the growth rate, as well as measures to counter an oversupply of certificates of entitlement in 2008, that has slashed the number of COEs available for vehicle buyers and sellers.
From an annual supply of more than 130,000 COEs in the mid-noughties, the quota is now barely 45,000.
Last week, Transport Minister Lui Tuck Yew said the annual vehicle growth rate will be cut further from next year.
If the rate is again halved, to 0.75 per cent, it is probable the COE quota for next year will fall to an all-time low of 40,000. Or even lower.
If there is no drastic change in external factors such as the state of the economy or employment rate, COE premiums will head north with the supply shrinkage.
Even if external factors turn bearish, COE prices may not dive, despite a weakening appetite for cars. History has shown that the biggest influence on premiums is the supply of certificates.
With the COE quota expected to slide below the previous record low in 1996, the underlying demand for cars - even if dampened by economic factors - is still likely to far outstrip supply.
More so now that Singapore's population has grown by 41 per cent since 1996.
Also, unlike before 2003, the taxi companies have become a major COE bidder. This is because the taxi population has grown significantly over the last decade, and there are now more players. These factors fuel competition for COEs.
So, for those in the market for a new car next year, be prepared to pay record prices. Quite likely, more than the $100,000 sellers are asking for a compact Japanese model.
For those willing to exercise some restraint, the old adage 'what goes up must come down' will still hold true.
COE supply will start to increase as the big cohort of cars registered during the COE boom years of 2003-2008 come of age and are scrapped.
While the allowable annual growth rate determines COE supply, the biggest factor is still the number of vehicles taken off the road, as new COEs are issued to replace expired ones.
Going by the age profile of passenger cars on the road today, it is quite likely that COE supply will start to rebound from as early as the second half of 2013.
This does not mean premiums will plummet in 2013. It just means that supply - which will hit rock bottom next year - would begin to recover.
It will take a couple more years before COE supply becomes sizeable again. 'Sizeable' would be around 60,000-80,000 a year.
This should happen in 2014-15. And by 2016, COE supply could be back to the six-digit region. The supply will stay generous for a couple more years before starting to shrink yet again.
Barring a fundamental change to the COE supply formula, the car market will continue to experience this see-saw effect. COE premiums and corresponding new car prices will continue to fluctuate with COE supply.
By 2016, distance-based electronic road pricing - now being tested - could be ready for implementation. The system will charge drivers not only for when and where they drive, but also for the kilometres they clock.
This will make for a more precise and equitable way of controlling congestion.
Perhaps by then, more COEs can be released - as was the case when the current ERP system was implemented in 1998. This will allow Singapore to accommodate a higher car-ownership rate, while maintaining a relatively free-flowing road network.
Those who choose not to jostle for a COE will also have more alternatives by 2016. The first two stage of the Downtown MRT Line would be up and running.
So would the Tuas Extension, which hopefully will reduce traffic to the huge industrial area in the west.
Until these pieces of the transportation plan fall into place, consumers and commuters should temper their expectations.
THE number of vehicles taken off the road plunged to an all-time low last month.
The sharpest shrinkage was for smaller cars. Only 363 units were deregistered - less than one-tenth August's figure.
The number of taxis scrapped has also more than halved to merely 43 units.
On the whole, 2,017 vehicles were taken off the road, according to just released data from the Land Transport Authority. That is fewer than half August's total of 5,503.
This does not bode well for the next six-monthly supply of certificates of entitlement (COE) starting February.
COE supplies are determined largely by the number of vehicles taken off the road in the immediate preceding six-month periods.
On top of that, the Government had indicated that the annual vehicle population growth cap would be cut from the current 1.5 per cent from February.
Hence car buyers and sellers are likely to face a double whammy, which will translate to fewer COEs and, consequently, higher prices.
Although the drop in deregistrations was not entirely unexpected, the severity of the shrinkage shocked many in the motor trade.
If the low numbers persist, next year's COE supply - already expected to be the smallest since the COE system started in 1990 - will be even smaller.
Trade observers say most, if not all, of the older cars which had their COEs revalidated 10 years ago have been scrapped by now. Going forward, motorists with cars that are below 10 years of age are expected to hang on to them because buying a new one has become too costly a proposition for many.
Vehicle growth rate to be slashed to 0.5%
By Hetty Musfirah | Posted: 14 October 2011 1802 hrs
Channelnewsasia.com
SINGAPORE: Singapore's annual vehicle population growth rate will be slashed to 0.5 per cent from the current 1.5 per cent by August next year.
But the reduction will be done gradually.
The measure to manage road use effectively was also spelt out in the Transport Ministry's addendum to the President's Address.
In recent years, Singapore's roads grew at an average of 1 per cent. This will slow down to 0.5 per cent over the next decade.
As such, the Land Transport Authority (LTA) said it's not sustainable to maintain the vehicle growth rate at 1.5 per cent. So cuts will be introduced gradually.
The current 1.5 per cent rate will be maintained for the period February to July next year, before the 0.5 per cent rate kicks in in August. This will hold till January 2015.
This means the overall growth rate next year will still work out to 1 per cent.
Industry players tell Channel NewsAsia that with the rate kept at 1.5 per cent from February to July 2012, the overall quota for Certificate of Entitlement (COE) is likely to increase by 10 per cent.
This works out to some 4,000 quotas every month.
But the increase is likely to be offset in the next quota period, between August 2012 and January 2013.
Others are expecting a smaller COE quota that could push prices up.
Michael Wong, Vice-President of Motor Traders Association, said: "If the assumption is that scrappage in the second half is going to be more than the first half, fine; I think the scrappage will try and balance out whatever that we've lost on the population growth. But if the scrappage is lower than what was in the first half, then overall in total, the net COE amount will become less.
"So if the economic situation stays as it is without major impact from the outside environment and if the interest rates stay as it is now, then that smaller quota will translate into a higher COE price.
In his Facebook post earlier on Friday, Transport Minister Lui Tuck Yew said it's likely there will be higher quota numbers from 2013, if the de-registration trends remain stable.
An analyst described the cuts in vehicle growth rates as aggressive, a move that will eventually lead to fewer cars on the road.
Lee Der-Horng, Department of Civil & Environmental Engineering, NUS, said: "The major agenda behind is still that, we'll like to see fewer vehicles on the road... I personally will expect the overall vehicle population to come down, maybe in three to five years' time, starting from August 2012."
As for Electronic Road Pricing (ERP), the ministry said there is scope to fine-tune applications, where trips are predominantly home-bound, and some congestion is tolerable.
Observers said this could refer to gantries along the Central Expressway (CTE) and East Coast Parkway (ECP).
Mr Lui said the cornerstone of the land transport policy is to develop an efficient and reliable public transport system. To achieve that, a five-year action plan is in the works to improve bus connectivity, service and capacity.
Major bus stops will be upgraded while more bus priority measures can be expected.
There will also be more integrated transport hubs to enhance bus-rail transfers and cycling-friendly facilities at transport nodes.
Some 8 in 10 bus services will also be wheel-chair friendly to better cater to the elderly and disabled.
To keep transport fares affordable, the Public Transport Fare Adjustment Formula will also be reviewed.
The ministry said it's also reviewing rail and bus financing frameworks to keep fares affordable, even as services improve.
As for maritime and air links, the ministry says it will create a pro-business environment to grow these sectors.
Separately, to tackle pollution, there will also be new schemes to encourage the take-up of low-emission vehicles.
New curb on vehicle population sends lights flashing in industry
By JOYCE HOOI
THE car trade has been bracing itself for cuts to the vehicle population growth rate, but did not expect the knife to cut so deep. The Land Transport Authority (LTA) took the industry by surprise yesterday when it announced that the growth rate cap will be cut to 0.5 per cent, starting from the second half of the quota year of 2012.
Currently capped at 1.5 per cent per annum, the rate will be kept at 1.5 per cent for the first half of the quota year - February to July 2012. For the second half - August 2012 to January 2013 - it will be cut to 0.5 per cent, essentially giving the quota year of 2012 a per annum growth rate of one per cent. For the quota years of 2013 and 2014, the growth rate will be cut to 0.5 per cent.
The COE quota for the February to July 2012 period will be announced in mid-January 2012. As at September this year, the motor vehicle population stood at 952,009. A 0.5 per cent growth rate means that only about 4,760 vehicles will be added the following year.
This will, in turn, affect the Certificate of Entitlement quota, which is a function of the stipulated vehicle population growth rate, the number of COEs needed to replace deregistered vehicles in the previous six months and the adjustment for overprojections of vehicle deregistrations in the 2008/2009 period.
Earlier this month, Transport Minister Lui Tuck Yew said that the 1.5 per cent growth rate would be cut for the upcoming three-year phase, noting at the same time that road growth would also slow down from one per cent in the past decade to 0.5 per cent a year.
'Everybody was expecting the minister to cut the growth by half to 0.75 per cent. So, it seems a little bit severe,' said a manager of a dealership here.
For others, even the cut itself was a surprise.
'We didn't expect any cut in the first place. The quota system was last tweaked barely over a year ago, when the supply of COEs was adjusted to correspond directly with the deregistration of old cars,' said Zeno Kerschbaumer, managing director of Volkswagen Group Singapore. 'The impact of this revised system could perhaps have been studied over a longer period of time before any further adjustments were made.'
According to LTA, the overall vehicle growth rate is not expected to have a large impact on COE supply in the next few years, 'especially in the context of an expected uptrend in vehicle deregistration numbers'.
Members of the car trade have their doubts about the expected increase in car deregistration numbers.
'Where are the cars going to come from for the increase in deregistrations? If you look at cars that are between 8 and10 years old, the numbers are very small,' an industry player said.
According to LTA figures, as at end-September, 9,662 cars will be due for COE renewal in 2012. That is a far smaller number than the 19,100 cars deregistered in the first nine months of this year.
'Given the current rate of deregistrations, paired with the cut in the growth rate, we can expect almost 4,000 fewer COEs for passenger cars to be available in 2012, compared to this year. This equates to over 10 per cent of the market, which would certainly cause COE premiums to rise,' said Dr Kerschbaumer.
If the pool of replacement COEs expands next year, it will only be due to drivers - particularly those with cars that are seven or eight years old now - deciding to deregister their vehicles before they are due for COE renewal. Most in the car trade doubt that that will happen. 'It's unlikely because right now, all these cars are still transacting in the second- hand car market. There's still demand for these kinds of cars,' one of them said.
While there is uncertainty about which way deregistrations will go, the trade was unanimous in its view that new entry-level cars are set to go nowhere. Already, the Category A COE price for smaller cars costs slightly over $50,000.
'Inevitably, entry-level cars will be phased out. For people looking at an entry-level car, they will just go for pre-owned, not- so-entry-level cars. At the end of the day, they're getting a better, albeit older car,' the general manager of a car brand here said.
Even with a COE pool that is already uncomfortably small, showrooms might not necessarily empty out late next year. 'People will come to just see, but stop buying,' the GM said, wryly.
I went to dig around VICOM's website. Please see attached for vehicle inspection prices and schedules.
Apparently, the most frequent inspections need to be made for public buses and taxis (<3 years old, 6-monthly). For cars <3 years old, no inspections are required. For cars 3-10 years old, an inspection is mandatory once in two years. If you look at the pricing, the highest are for heavy goods vehicles, taxis and cars.
If we go by the fact that vehicles are getting older, thus needing more inspections, and the taxi pool is getting bigger as more taxi companies are being set up, this will equate to more vehicles being inspected. Assuming lesser vehicles being scrapped and more people buying 2nd-hand cars due to higher COE, it also means more frequent mandatory inspections.
LTA intends to increase the number of public buses on the roads as well - and it will equate to more buses being inspected on the roads.
Overall, the effects may be neutral to mildly positive, I feel.
18-10-2011, 11:20 AM (This post was last modified: 18-10-2011, 11:20 AM by brattzz.)
1/3 revenue = Car Inspections
Market Shares by = VICOM / STA
No. of cars = set by sg gov.
Pricing = Stability and gradual increase only.
2/3 revenue = Material testing = SETSCO
: )
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR!
4) In BULL, SELL-SELL-SELL!
(18-10-2011, 11:20 AM)brattzz Wrote: 1/3 revenue = Car Inspections
Market Shares by = VICOM / STA
No. of cars = set by sg gov.
Pricing = Stability and gradual increase only.
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