This is very scary!
Dec 23, 2010
COE premiums breach $70,000 mark
By Christopher Tan, Senior Correspondent
IT IS going to be a blue, blue Christmas for car buyers and sellers alike after certificate of entitlement (COE) premiums continued their phenomenal spike.
While two out of five COE categories ended slightly lower at the latest tender yesterday, the other three went through the roof.
COEs for cars up to 1,600cc softened from the previous tender, ending 3.1 per cent lower at $46,129 - still among the highest levels in the past 10 years.
COEs for cars above 1,600cc, however, stayed resilient, rising by 15.2 per cent to close at $72,001.
Open COEs - which can be used for any vehicle type, but end up mainly for bigger cars - also continued their surge, hitting $76,102. They chalked the biggest percentage gain yesterday of 17.3 per cent.
Commercial vehicle premiums ended 4.7 per cent higher at $33,501, while motorcycle premiums were 8.8 per cent lower at $1,551.
Motor traders were shocked by the price spiral as it had come just a fortnight after the massive hikes of the last tender, which saw the single biggest increases in more than a decade, with rates for bigger cars rising by more than 30 per cent.
Premiums are now among the highest since the COE system started in 1990. The last time premiums were this high was in the late 1990s.
In 1994, they breached $100,000 twice because of speculation. After anti-speculation measures were introduced, rates softened but still hovered between $50,000 and $75,000 from 1995 to 1999 on the back of a meagre COE supply.
'Prices are running ahead of my own expectations,' said Mr Cheah Kim Teck, motor operations chief executive of multi-brand agent Jardine Cycle & Carriage. 'But I think it will get worse before it gets better. I don't see prices coming down next year.'
Car prices, which have gone up by as much as $50,000 from a year ago, are expected to climb even higher after the latest COE results.
Traders expect the high prices to dampen buying interest severely, seeing how a Japanese family sedan which cost a little over $50,000 last year is now retailing at more than $100,000.
Mr Teo Hock Seng, managing director of Hyundai agent Komoco, said his company might start quoting prices without COE.
Mr Teo, who is also the Motor Traders Association (MTA) president, said the year-end rush to meet sales targets has driven many companies 'to deliver on every booking they have'.
'Whoever is brave gets the COE,' he put it plainly.
The 'brave', industry watchers reckon, are the luxury car sellers, led by the German brands.
A perennial tussle between BMW and Mercedes-Benz to be the No. 1 luxury marque is fuelling the frenzy. As at last month, the two were neck and neck, having registered about 4,000 cars each.
But with such lofty COEs, observers are doubtful if sellers - who often subsidise the cost of a certificate to clinch sales - can make decent profits, if at all, even for the premium brands.
Cycle & Carriage's Mr Cheah said: 'There is no money to be made this round. It is just window dressing and attempts to lighten the inventory load.'
The MTA had earlier this year made an appeal to the Government to help mitigate the sharp cut in COE supply. But the association has not received any word yet.
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Business Times - 23 Dec 2010
Motorists survey damage from $72,000 COEs
Dealers taken aback by Cat B surge that comes weeks after $14,612 hike
By SAMUEL EE
(SINGAPORE) The COE premium for the big car category continued to climb strongly in the last bidding exercise of the year yesterday, this time to a 15-year high, with its sharp ascent surprising most dealers.
A Category B certificate of entitlement - for cars above 1,600 cc - now costs $72,001, up $9,499.
Two weeks earlier, Cat B had jumped $14,612, shocking the market by rising to a 13-year high. As a result, new orders slowed down as distributors adjusted their sticker prices upwards to reflect the new COE price levels.
Only two premium makes did not raise prices, said the sales manager of a luxury dealership.
'It could be due to the desire to gain market share just before the year-end,' he added.
The last time that an equivalent big car COE premium was in the $70,000-plus range was from early to mid-1995. But back in 1995, the total market size for new cars was even smaller, at about 31,000 units. This year, total new registrations are expected to be over 41,000.
But the sales manager pointed out that comparing annual registrations may not reveal the full picture. 'In the second half 2010, the COE quota was small, whereas the first half was a bonus,' he explained.
He described the number of bids in Cat B yesterday as 'heavy'.
'The interest for luxury cars is still there. Perhaps some dealers are bidding for the future,' he said, referring to market concerns of a further reduction in the COE quota from February 2011 onwards.
If so, that would explain the sharp hike in Cat E, the open category. Currently used to register Cat B cars, Cat E yesterday soared $11,202 to $76,102.
But Cat A - for cars below 1,600 cc - slipped $1,474 to $46,129. Cat C - for goods vehicles - rose $1,500 to $33,501, while Cat D - for motorcycles - fell $50 to $1,551.
'The Cat A premium is softer because customers in this segment are more price-sensitive,' said the boss of a mid-sized mass market dealership.
He added that if not for late bids from the taxi companies, the Cat A premium would have been slightly lower.
In yesterday's tender, the strength of the passenger car categories was evident. Cat A and B were the first off the mark, with Cat B already surpassing its previous level of $62,502 with about 40 minutes remaining. Not more than 10 minutes after, Cat E joined the party by jumping straight to about $58,000.
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