Singapore’s Certificate of Entitlement (COE) prices have recently hit unprecedented highs, with many questioning who can afford these soaring costs.
This phenomenon prompts us to explore the implications, causes, and potential solutions for both the automotive industry and everyday motorists in Singapore.
The Rise of Private-Hire Vehicles
According to data from the Land Transport Authority, the number of chauffeured private-hire cars skyrocketed from 614 to 46,477 between 2013 and 2022.
Statistics from LTA Website
This surge has coincided with a decline in the number of privately owned cars, dropping from 582,296 to 542,145 during the same period.
The significant increase in private-hire vehicles is raising concerns and questions about the motivations behind this shift.
Masquerading as Private-Hire Drivers
In the article written by Straits Times, Carro’s CEO, Mr. Aaron Tan, revealed that a large percentage of car buyers finance their purchases through loans and register their cars as private-hire or corporate vehicles.
This strategy allows them to secure loans of up to 90-100% of the vehicle’s cost, compared to the 60-70% limit for privately owned cars.
The financial risks associated with this approach have become a challenge for Carro, emphasizing the need for a closer examination of these practices.
Impact on COE Prices
As private-hire and corporate vehicles make up 37% of car registrations from January to September, concerns arise about their contribution to the surge in COE prices.
Mr. Christopher Tan, a senior transport correspondent at The Straits Times, notes that the unhindered expansion of private-hire vehicles could lead to increased road use, congestion, and carbon emissions.
This calls for a reevaluation of how these vehicles are classified within the COE bidding pool.
Car registrations from January to September 2023, LTA Website
Coping Strategies
We have almost heard of all the possible strategies that the LTA could possibly implement to cope with the sky high COE prices, and we have even done an article regarding the possible alternatives for the COE system.
However, in this articles’ context to address the challenges posed by the surge in private-hire vehicles and escalating COE prices, there are also two proposed coping strategies we could think of.
- Increase in Downpayment:
Implementing higher down payment requirements for car purchases could be a viable solution.
This would deter potential buyers from relying on high loans with minimal down payments, making car ownership more financially responsible.
- Stricter Financing Requirements:
Consideration should be given to tightening financing requirements for private-hire vehicles.
This would prevent buyers from using easy financing as a way to circumvent strict financing regulations, as noted in Straits Times article by Mr. Say Kwee Neng, an automotive consultant
Evaluating COE System’s Effectiveness
The roundtable discussion also delves into the effectiveness of the COE system in reflecting the real social and economic value of driving.
During the discussion hosted by Straits Times, Associate Professor Walter Theseira suggests that the current system lacks an accurate measure of the long-term value of different vehicle types in Singapore.
This raises questions about whether the allocation of COE quotas to private-hire cars, taxis, or privately owned vehicles is justified.
The Road Ahead
As Singapore grapples with the surge in private-hire vehicles and the resulting impact on COE prices, there is a need for comprehensive analysis, policy adjustments, and public awareness.
Striking a balance between efficient transport, environmental considerations, and individual affordability will be crucial in shaping the future landscape of Singapore’s automotive industry.
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