COE and Car Prices

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New thread to update on COE prices during each bidding.

This article relates to the bidding for today, Sep 22, 2010. Smile

Sep 22, 2010
COE prices fall across board

By Christopher Tan

COE prices fell across the board at the latest tender on Wednesday, but car premiums remained above the $30,000 level.

Certificate of entitlement for cars up to 1,600cc ended at $30,001, down from $33,089 two weeks ago.

The premium for cars above 1,600cc closed at $42,501, down from $44,129. And the Open certificate, which can be used for any vehicle type but ends up mainly for cars, finished at $43,290, down from $44,001 previously.

Commercial vehicle COE ended at $31,001, from $33,000; and motorcycle premium landed at $1,452, from $1,502.

Motor traders attributed the lower prices to weaker demand in the last two weeks as higher prices kept buyers away.
My Value Investing Blog:
Business Times - 21 Oct 2010

COE premium for big cars rises, dips for small vehicles


THE COE premium for big cars surged in yesterday's bidding exercise for certificates of entitlement, even as the premium for small cars slipped slightly.

Category A, for cars below 1,600cc, eased $717 to $32,415, while Cat B, for cars above 1,600cc, climbed $1,799 to $44,600.

Cat E - the open category - tracked Cat B yesterday and rose $810 to $44,900.

Cat C, for commercial vehicles, fell $378 to $30,511, while Cat D, for motorcycles, went up $187 to $1,689.

The sales manager of a mid-size Japanese distributorship said that the fall in the Cat A premium was 'not significant'.

'The major players during the bidding for Cat A were the taxi companies,' he said. 'Demand for cabs is high now because of the strong economy and the tourism boom, so taxi operators need to increase their fleet size.'

As in recent months, demand for smaller passenger cars has generally been muted, except for some brands such as Volkswagen, he added.

According to him, the lower euro and the forex advantage this gives distributors of some Continental makes over Japanese models is one reason.

'Japanese models usually have a higher OMV (open market value) because of the strong yen, which means their agents have a smaller profit margin. So this does not allow them to bid for COEs as aggressively as the competition,' he explained.

As for the Cat B premium, he attributed the rise to a smaller COE quota. And the Cat E premium is correlated to Cat B because it is also used to register big cars.

'Demand for bigger and more expensive cars is still good because of some new models that have been launched,' said the manager. 'Also, the fact is that in times of higher COE premiums, luxury car buyers are less affected by price increases than those who buy bread-and-butter models.'

My Value Investing Blog:
COE prices remain one of my best indicators of the general economic level and market sentiment levels. I bought a car last year in Mar 09 when COE was only at $1,500. Not exactly the lowest (I think just a few weeks before that it was $200?) but subsequently markets rallied. Am thinking that it's not a perfect gauge but good enough to smell the bottom.

Spurrious correlation? Anybody can share if things were like this during the late 90s, early 2000s as well?
(21-10-2010, 09:09 AM)kazukirai Wrote: COE prices remain one of my best indicators of the general economic level and market sentiment levels. I bought a car last year in Mar 09 when COE was only at $1,500. Not exactly the lowest (I think just a few weeks before that it was $200?) but subsequently markets rallied. Am thinking that it's not a perfect gauge but good enough to smell the bottom.

Spurrious correlation? Anybody can share if things were like this during the late 90s, early 2000s as well?

Yes agree with you on COE prices being generally reflective of economic conditions; however in Singapore the car supply can be tweaked by the Transport Ministry and thus this can result in distortions like the $2 COE.

You were really lucky to get your car when the COE was just $1,500! Now it's about 20X of that!

For me, I can't afford a car just yet; and with COE prices hovering at such levels and poised to increase further in future, it looks like this is becoming a more and more distant fantasy for me.... Big Grin
My Value Investing Blog:
Wonderful.....just when you were hoping for lower inflation rates - the news comes out that COE prices hit 10-year highs! So what does it take to buy a brand new car these days? At least a cool S$80 grand from what I heard, unless you settle for second-hand. Undecided

Nov 18, 2010

COEs at 10-year high

COEs up across the board

By Goh Chin Lian

PRICES of Certificates of Entitlement (COE) shot up to a 10-year-high for all car categories on Thursday, as taxi companies expand their fleet and motor traders rushed to meet annual sales targets ahead of a possible quota cut in February.

The COE price for cars up to 1,600cc climbed to $39,000, up 14.7 per cent from two weeks ago.

The COE premium for cars above 1,600cc rose 5.3 per cent to $47,890.

The price for the open category COE, which can be used for any vehicle type but which is mainly used for cars, was 8.5 per cent higher at $49,890.

The COE price for commercial vehicles ended at $31,202, up 0.6 per cent. The premium for motorcycles was an exception. It closed at $1,002, 31 per cent lower than its last price a fortnight ago.

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Business Times - 19 Nov 2010

COE premiums soar to 10-year highs

A combination of festive demand and panic buying drive premiums up


(SINGAPORE) COE premiums spiked across the board yesterday - in some cases to 10-year-highs - on a combination of festive demand and panic buying.

The second bidding exercise of November for certificates of entitlement saw Category A - for cars 1,600cc and below - jump $4,999 to $39,000, while Cat B - for cars above 1,600cc - climbed $2,389 to $47,890. The last time passenger car premiums were higher was in early 2000.

Cat E - the open category - rose $3,889 to $49,890. As for Cat C - for commercial vehicles - it increased by $196 to $31,202, while Cat D - for motorcycles - inched up $50 to $1,502.

'Where the Cat A market is concerned, traffic is slowly returning to the showroom for some makes,' said the sales manager of a mid-sized Japanese dealership.

He explained that there is traditionally greater demand for cars during this period because of year-end bonuses.

But the bigger factor seems to be concern about a possible shrinking of the COE supply. 'Some people worry that the COE quota will be much smaller from early next year,' he said.

The new COE quota will begin from February 2011 for a six-month period. He added: 'I suppose this has caused some panic buying.'

The senior executive of a big dealership, who declined to be named, agreed.

He said: 'We all agree the general trend for COE premiums is for it to go up but I think this has been an overreaction.'

He explained: 'Perhaps some dealers were a bit nervous and ended up bidding too strongly. We certainly didn't push up premiums, and neither did the taxi companies.'

As for Cat B's premium increase, the manager attributed it to the launch of new models from Audi and Volvo, as well as the need by some makes to meet their annual sales targets.

'The premium segment is holding up well because of the buoyant stock and property markets. Most luxury brands have been seeing strong sales over the weekend and even on the public holiday on Wednesday,' he said. 'But there is also some pressure on the volume market to turn in better sales figures at the end of 2010.'

Distributors are expected to hike their prices in line with yesterday's higher premiums.

For example, Borneo Motors Singapore, which is the authorised distributor for market leader Toyota as well as its luxury Lexus division, said it will raise its Cat A models by $5,000 and Cat B models by $2,500.

Nov 19, 2010
Car COE prices hit 10-year high

Cut in supply of COEs, expected revved up demand among reasons
By Goh Chin Lian

PRICES of certificates of entitlement (COE) shot up to a 10-year-high for all car categories yesterday, as motor traders rushed to meet annual sales targets ahead of a likely quota cut in February. The COE price for cars up to 1,600cc rose to $39,000, up 14.7 per cent from a fortnight ago.

The COE premium for cars above 1,600cc climbed 5.3 per cent to $47,890.

The price for the open category COE, which can be used for any vehicle type but is used mainly for cars, was 8.5 per cent higher at $49,890.

The last peak for these three categories was in the first half of 2000, at $39,348, $51,992 and $51,120 respectively.

Nissan agent Tan Chong Motor's general manager Ron Lim told The Straits Times yesterday: 'We are still in shock.'

The COE price for commercial vehicles ended at $31,202, up 0.6 per cent.

The premium for motorcycles also went up. It closed at $1,502, up 3.4 per cent from its price two weeks ago.

Motor traders attributed the spike in car COE prices to a combination of factors, including their anticipation of people changing cars at the end of the year when they get their bonuses.

Motor Traders Association vice-president Michael Wong said: 'Now that a dampener has been put on the property market, some money can be thrown back to cars.'

A drastic cut in the supply of COEs since April this year compared to the last 10 years, could have contributed to the unprecedented price increase, he noted.

The Land Transport Authority announced in July that there would be a total of 3,844 COEs available a month across all categories of vehicles between August and January - a 9.3 per cent drop from the monthly quota at the time.

As recently as 2008, the COE quota for just one category of cars (those up to 1,600cc) was about 4,070.

Tan Chong's Mr Lim said motor dealers may also be afraid to hold off their bids until the next exercise, which will be in three weeks' time, instead of the usual two weeks. They also expect a quota cut in February, given that fewer vehicles were being taken off the road.

The supply of COEs is fixed every six months based on the number of vehicles scrapped or re-exported in the immediate preceding six-month period. The number of such deregistrations has been falling. In September, it dipped below 3,000 for the first time in nearly a decade.

Motor traders also wondered whether cab companies fuelled the COE price increase for cars up to 1,600cc. Taxis fall under this COE category.

They pointed to transport group SMRT Corp, the third biggest taxi operator here, which has ordered 2,000 Chevrolet Tosca sedans, with the first batch to be delivered in the first quarter of next year. But SMRT, which has 2,600 taxis, told The Straits Times it did not place bids this time around.

TransCab, the second largest taxi operator with 4,000 cabs, also said it held off bidding in this round. It plans to expand its fleet by another 300 taxis by Chinese New Year in February.

Said its general manager Jasmine Tan: 'The price this time is crazy. When we saw it at $35,000, we knew it was too high for us.'

The company is not worried though. Ms Tan said it has more than 100 COEs on hand from previous rounds of bidding.

Looking ahead, motor traders expect car COE premiums to stay high, followed by car prices. They are expected to raise prices this time around for small cars by $5,000, and larger cars by $2,000 to $3,000.
My Value Investing Blog:
Good time to buy a car? Yes, says Asiaone, even as COE prices hover at 10-year highs!

Mon, Nov 22, 2010
Now's a good time to buy a car
My Lifestyle My Drive

After dramatic price increases following cuts in quota earlier this year, COE prices seem to have settled. -My Lifestyle My Drive

After the dramatic price increases following cuts in the quota earlier this year, the prices of certificates of entitlement (COEs) seem to have settled.

Category A appears to hover around $32,000 while Category B has settled at around $42,000 in the past six bids. There have been the usual price fluctuations, but they were not wide.

Every time COE prices dip a little, buyers flock to car showrooms. This results in an increase in COE prices in the next bid, which in turn leads to slightly higher new car prices. Any price rise dampens demand, which again brings a slight fall in COE prices in the next bidding. And so the cycle repeats itself. This see-saw effect is more apparent in Category A, which generally has more buyers who are price sensitive.

The settling of COE prices within a relatively narrow band means car prices have generally stabilised for the immediate future. This makes it easier to think seriously about replacing or purchasing a brand new car.

Bear in mind that if there is yet another reduction in the COE quota in February next year, the prices of COEs may possibly spiral upwards as they did when there was a drastic cut in the quota. No one can predict the quantum of COE price increases early next year but a huge jump remains a distinct possibility if the economy remains buoyant.

The only thing you can be certain of is that there will be another significant cut in the COE quota unless vehicle deregistrations start increasing dramatically. With the current deregistrations numbering 2,062, 2,420 and 2,320 in May, June and July respectively, the COE supply could be cut still further to well below 26,000 next year if the trend continues. This means a further cut of over 25 per cent from this year's figures. The current strength in the used car market suggests that a rise in deregistrations is not going to happen any time soon.

If your car is more than four years old, this may be a good time to seriously consider buying a new car if you can afford it. Interest rates are still low and car prices seem reasonably stable for now. The prospect of a significant price reduction in the COE is very unlikely unless there is an economic catastrophe.

Unfortunately, for marginal and first-time buyers, prices of entry level cars remain high. The tiny Kia Picanto costs $50,000 while a family car like the Toyota Corolla Altis retails at $84,000.

Those who commute on weekdays by public transport and only need a car at night and on weekends could consider an off-peak car. This would save them $17,000 off the purchase price.

Another alternative would be to buy a used car, preferably one which is less than three years old and still under warranty. The first two years see the steepest depreciation in value so the second owner could be getting quite a good deal. It would be wise to send the car to a trusted mechanic for a "health check" before confirming the purchase.

The best alternative, if your finances permit, is to buy a new car as soon as possible. Prices are expected to be fairly stable for these few months with very little prospect of a drastic fall in the cost of COEs. With COE prices at current levels, it would probably be prudent to consider slightly more expensive cars rather than the cheapest ones. This makes economic sense since the cost of the COE would form a bigger component of the price of an inexpensive car.

However, do not stretch yourself too much financially or you may end up having difficulty servicing the installments and maintaining the car. Bear in mind too that servicing costs for premium makes are usually higher than those for mass market ones. So, weigh all the factors carefully before rushing into your purchase.
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Dec 3, 2010
COE supply to shrink further in new year

By Christopher Tan, Senior Correspondent

CAR prices, which have risen by $20,000 to $30,000 in the last year, are poised to go even higher in the coming months.

This is because the supply of certificates of entitlement (COEs) is expected to shrink again when the next quota kicks in come February - the sixth consecutive annual contraction.

In fact, calculations by The Straits Times indicate that supply could fall below 40,000 pieces for the new year, which would make it the lowest since the COE system started in 1990.

This is the result of two factors. First, the supply of COEs is largely determined by the number of cars deregistered, but spiralling COE prices are dissuading more motorists from scrapping their old cars and buying new ones.

Secondly, the Government has halved the allowable growth rate of the car population in Singapore.

Mr Koh Ching Hong, the managing director of Toyota distributor Borneo Motors, described it as a 'scary' prospect.

'This is going to hurt - a lot,' he said, referring to how the crunch will impact the motor industry.

The smallest COE supply thus far was in 1996, when 40,710 were released. Last year's pool numbered 77,000; this year's shrank to 48,000, sending COE premiums to between $39,000 and $49,000.

As an indication of how COE premiums affect vehicle prices, the cost of a popular car like the Toyota Corolla Altis 1.6 shot up to $89,488 this year, up from $67,988 a year ago. An Audi A4 1.8 rose from $140,200 to $170,200.

This year's lofty premiums have also nudged budget cars, such as those from China, right off the market, when the cost of the COE surpassed that of the vehicles themselves.

With the coming supply contraction, observers estimate premiums will hit $60,000 by the second half of next year.

Mr Andre Roy, the group managing director of multi-brand Wearnes Automotive, said: 'If you just go back in history, when quotas were around 40,000 to 45,000, COE prices were around $60,000 to $70,000.'

But luxury cars will continue to thrive in such a market, he said.

The motor industry at large, which has been downsizing in the last year or so, is bracing itself for an even leaner year.

Motor Traders Association (MTA) president Teo Hock Seng said: 'The writing is on the wall. Everybody will have to trim down further.'

He also expects car prices to rise, unless the COE supply starts expanding again, which many believe will happen from 2012. This is because there was a surge of new car registrations between 2004 and 2006. These vehicles would be old enough to be scrapped.

But Mr Roy of Wearnes said he is not so optimistic, because high car prices will just persuade more car owners to hang on to their existing vehicles.

This will crimp COE supply, which is determined mainly by the number of vehicles taken off the road. Already, deregistration has slowed substantially this year. Between July and October, 12,928 vehicles were deregistered - either scrapped or re-exported - 23 per cent down from the 16,766 in the corresponding months last year.

Besides deregistrations, the COE supply is also pegged to an allowable annual growth rate of the vehicle population, which was halved last year to 1.5 per cent. In September, Senior Minister Goh Chok Tong even suggested that it should go to zero, to curb road congestion.

The MTA has meanwhile lodged an appeal with the Land Transport Authority over the dwindling COE supply.

Industry watchers are not holding their breath for relief measures.

Mr John Rachmat, a transport analyst with Royal Bank of Scotland Asia Securities, sees the COE supply trend as 'a renewed supply-side push' to get people to use public transport.

He said: 'Generally speaking, such a move will bring the best result if there's an accompanying push for better service by public transport operators.'

Associate Professor Anthony Chin, who specialises in transport economics at the National University of Singapore, said the limited COE supply will bring the Government closer to its aim of managing road congestion.

'This, of course, helps to facilitate movement of goods and people and that's good for the economy,' he said.

However, it also means many people below a certain income level will not be able to own a car.

'But this is a market reality,' he said.

My Value Investing Blog:
So, should we expect premiums to exceed S$50,000 soon? Rolleyes

Business Times - 08 Dec 2010

Scramble for COEs likely in today's bidding exercise

Premiums expected to shoot up even further


(SINGAPORE) Distributors are expected to 'scramble' for COEs in today's bidding exercise - the second last one for the year - as some rush to secure certificates of entitlement before what they believe will be a further reduction in the quota.

'I don't think it will be a frenzy but there should be a scramble from now on because there are only three more tenders left before the new COE quota comes into effect,' said the managing director of a small mass-market dealership. 'If you don't go in now, it will get worse later.'

The announcement of the next COE quota - from February to July 2011 - is due next month and most car dealers are expecting it to shrink further because of the low number of deregistrations.

Deregistration numbers for Category A (below 1,600cc) and Cat B (above 1,600cc) cars have been on the general downtrend since March this year, after COE premiums began rising sharply.

The amount of new COEs released is determined largely by the number of vehicles deregistered in the preceding six-month period. With de-registrations sliding, there is pessimism over the size of the upcoming quota starting in February 2011.

'Looking at the numbers, I believe the whole of 2011 will get an allocation of no more than 25,000 passenger car COEs, which means a total of about 28,000 to 30,000 new car registrations next year (because of the spill over from this year's COE quota),' said the managing director.

The new car market in 2010 is already headed for a massive contraction, with total registrations of only slightly more than 41,000 passenger cars, or down almost 40 per cent from the 68,862 units in 2009.

As for today's COE premiums for Cat A, B and E (the open category), just about everyone is prepared for a spike. The jump during the last round three weeks ago to 10-year highs had left both customers and dealers 'shell-shocked', said the sales manager of a Japanese dealership. Cat A shot $4,999 to $39,000, while Cat B climbed $2,389 to $47,890 and Cat E rose $3,889 to $49,890.

'I hope premiums won't go up but it looks they all will because it is also the year-end and companies are closing their accounts,' said a sales manager, referring to how some firms try to use up their budgets before the start of a new financial year.

Then there are the 'healthy orders coming in because of the good bonuses'.

The sales manager added: 'And since it is a three-week interval between tenders, this means more orders than usual have been collected.'

The boss of one of the biggest dealerships in town expects Cat A and B premiums to rise by another $1,500 to $2,500 today.

'I hope it won't be another big jump of $5,000. That will kill the market,' he said.

Yet, a COE scenario that is composed of a small quota and high premiums may not lead to a shake-up of the car industry, according to the dealership boss.

'I am not sure it will happen,' he said. 'I thought some of the smaller brands would disappear but they are still around this year. And even more amazing is that there are new makes like the Holden HSV entering the market.'

My Value Investing Blog:
Time to buy a CAR! Smile COE is at $62++k and moving up thru' the rest of 2011.

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