LTA to study why COE plummets

[Ahyoo2002]

Nov 20, 2008

COE plummets to $2

 

Besides weak demand, motor traders blame harder-to-get credit

By Christopher Tan

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.

 

'Every day you hear of job cuts.'

 

The previous lowest car premium was $50, in December 1997. That, however, was when bidding was closed - bidders could not see what the prevailing premium was.

 

After that freak result, the system was changed to the current open bidding system, where the prevailing premium is transparent to all. Observers said in such a system, a crash is impossible because bidders would rush in at the eleventh hour if they saw that prices were low.

 

But there was no rush yesterday. With half an hour to go before tender closed at 4pm, premiums remained at $1 across the board, a sign that there were fewer bids than available COEs.

 

Things began to move only in the last 15-20 minutes, but not for the small car COEs - which make up the bulk of certificates in each tender. By 4pm, bidding in this category closed at $2, with the number of bids exceeding the supply of 1,851 COEs by just one.

 

Mr Gavin Yeo, commercial director of Toyota agent Borneo Motors, one of the largest COE bidders here, said: 'When premiums are at $1 at 3.30pm, definitely the demand is weak.'

 

Mr Yeo said Borneo made more bids than usual, and would have submitted more if it had the time.

 

COE prices in all other categories fell sharply as well. COE for cars above 1,600cc closed at $4,889 - almost half the previous value. The Open COE, which can be used for any vehicle type but ends up largely for cars, closed at $6,889 - down from $10,490 before.

 

COE for commercial vehicles ended at $6,189, from $8,889; motorbike COEs slid to $1,012 from $1,509.

 

Besides the weak demand for cars in the current economy, motor traders said tighter access to credit by banks and finance houses had caused more car loan applications to be rejected.

 

Singapore Vehicle Traders Association president Neo Nam Heng said: 'To get an 85 per cent loan, even if you have a very good income, is very difficult now.'

 

Motor Traders Association president Tan Kheng Hwee sees a bright side, though. 'For shoppers who are going in to buy now, they can expect discounted prices and good deals,' she said.

 

'If you think you're going to want a car for the next 10 years and you can afford one now, then better buy now because no one can be certain for how long COE prices will remain below $10,000.'

 

Dealers have begun slashing prices. Borneo has cut prices by up to $6,000, bringing the cheapest model, the Toyota Vios, to just below $44,000. Chery agent Vertex Automobile has cut the QQ's price by $5,000, to $22,999.

 

Most buyers who secured COEs yesterday can expect sizeable rebates from dealers. Folks looking to extend their car's lifespan can look forward to a lower renewal premium, which is the average of three months' COE rates.

 

Dealers said they expect buyers to rush back in.

 

Asked for its reaction to the $2 COE, a Transport Ministry spokesman said: 'It's a result that's quite unexpected. We'll have to study it carefully to find out why it happened.'

[RadX]

I understand a lot of loans did not go thru.....thus causing the crash

[Sillyme]

The number of COE released should be relative to the previous COE price change. If the price COE dropped in the previous bidding exercise, then the number of COE for the next should also decrease accordingly.

[Newbie_driver]

now with the economic crisis, pple are now less likely to have huge commitment now especially burden.....

[Ody_2004]

such thing happened also must study? create job to keep employment?

[RadX]

so that car dealers wun have to be retreneched and they join civil servc as teachers

[Liuz0004]

[Hatch_lover]

These guys have so much time to waste on irrelevant `studies'. A simple supply and demand also dunno, esp when its already an open system. What's there to `study'? if they indeed waste time and money to conduct such a study and then reports it in public, the person who sanction the study should be retrenched for being too free.

 

More likely than not some fellow is jumping up and down for `losing' $18mio for this bidding cycle and `studying' how to avoid these kind of incidents from happening again.

 

Seriously, since this is a true supply/ demand situation, no action should be taken.

[Silver_blade]

Of course must study....they can't let the fat cow go so easily. They tweaked the system right after the last crash to make sure it doe not happen again.....i'm sure they are keen to do the same this time.

[Silver_blade]

Looks like LTA may seriously cut more COE the next time. they didn't not slashed more COE the last time cos they were afraid that the price will shot up (market was in a better shape than but I wonder if they have access to data from MAS/MIT).

[Karu]

Of course muz study... Lose $$$ big time this time round!!!

[Schneider79]

Actually, in times like this... if LTA had solved the CNG road tax thing few months back. Now is the time to buy CNG cars... but too bad.

[Metalslug]

good if u bid your own coe...but for those who take cars from AD or dealers, how likely will they give u your full rebate back?

[Roh96]

Not surprising to me, LTA has been trying hard over the years to prevent crash in COE. From closed bidding changed to open bidding, but it still crashed right infront of their eyes. I am going to see what pattern they going to chu this time. I suspect they may change their procedure of submitting bid, making it more easy for everyone to bid even at very last min. Actually what surprised me was everyone watching the COE crash right infront of their eyes. I am sure there are >few thousand ppl watching COE every round including dealers and many MCF members etc. I believe there isn't enough time for ppl to react or rush in the last min. This is just my guess.

[Lab4games]

what's there to study?

everyone just start of bidding with $1. the highest bidder $2?

open system is fair. no one holds a gun at the bidder on what amount to bid.

 

LTA just angry that they lost around $18millions!

[Quantum]

no need to waste time to study lar, just cut down COE quota to half, price shut up immediately

[Sportster]

The highest bidder is not $2. There are many ADs who bidded $8K/$10K etc. It's just that the lowest bid of $2 happen not to oversubscribe the COE quota.

[Speddevil]

ERP shd go down if this is the case