The Certificate of Entitlement (COE) system is a pivotal aspect of car ownership in Singapore, shaping market dynamics and influencing decisions for buyers, dealers, and policymakers alike.
Recent spikes in COE prices have raised concerns among motorists, prompting discussions on potential solutions such as introducing a separate COE category for private-hire vehicles.
Transport Minister Chee Hong Tat recently addressed these issues in Parliament, offering clarity on the factors driving these trends and the challenges in implementing structural changes.
Local Buyers Driving COE Demand
Contrary to widespread speculation, Minister Chee emphasized that the recent surge in COE prices is not primarily caused by private-hire firms or foreign bidders. Instead, strong demand from local individual buyers has emerged as the primary driver.
Supporting this assertion, data revealed that Singapore residents accounted for 84% of successful bids in 2024, a significant increase from 66% in 2022.
Meanwhile, bids won by foreigners declined from 3% in 2022 to just 2% in 2024. Similarly, car-leasing companies, which often bid for private-hire vehicles, secured only 10% of COEs this year, down from 26% in 2022.
These figures highlight a notable shift in market dynamics, underscoring the growing influence of local buyers.
Challenges in Establishing a Separate COE Category for Private-Hire Cars
Source: MOT/Website
The idea of creating a distinct COE category for private-hire vehicles has gained traction as a potential measure to manage rising premiums. However, Minister Chee pointed out that this is “not a straightforward exercise.”
One key challenge lies in the fluctuating demand for private-hire COEs from car-leasing firms, which varies significantly across quarters and years.
Determining an appropriate quota for this category would therefore be difficult, potentially leading to undesirable trade-offs. Allocating too many COEs to private-hire cars could reduce the supply for Categories A and B, driving up prices for other buyers.
Conversely, underestimating the quota might lead to higher costs for private-hire operators and commuters.
The hybrid nature of many private-hire vehicles, which often serve dual purposes as personal cars, further complicates classification efforts.
This hybrid use case blurs the lines and makes it challenging to enforce a separate category without unintended consequences. As such, the government is carefully evaluating the proposal while considering its broader implications.
Declining PQP: A Silver Lining for Existing Car Owners
Source: MOT/Website
Amid rising COE premiums, there is positive news for existing car owners. The Prevailing Quota Premium (PQP), calculated as the average COE price over the past three months, has shown a decline.
For Category A cars, the PQP dropped by 4% from S$102,584 in November 2023 to S$98,317 in November 2024. Category B cars experienced an even steeper decline of 21%, from S$138,094 to S$109,698.
This trend presents an opportunity for car owners to extend the lifespan of their vehicles by renewing their COEs at lower costs, bypassing the competitive bidding process altogether.
Implications for Car Dealers
The evolving COE market underscores the importance of adaptability for car dealers. With local individual buyers playing a dominant role in COE demand, dealers need to align their offerings to cater to this segment’s preferences. Additionally, the unpredictable nature of COE demand highlights the need for agile inventory management and strategic planning.
Dealers must also stay abreast of potential policy changes, such as the introduction of a separate COE category for private-hire cars, to remain competitive in an ever-changing market landscape.
Navigating the Market as a Car Buyer
For car buyers, understanding these trends is key to making informed decisions. Monitoring PQP movements and COE quota announcements can help identify optimal times to purchase or renew a vehicle. Renewing COEs during periods of declining PQP, for instance, offers a cost-effective alternative to acquiring a new car. Staying informed about government announcements and market developments will be crucial for navigating the complexities of car ownership in Singapore.
Looking Ahead
The COE system remains a dynamic and integral component of Singapore’s urban planning and transportation strategy. As the government continues to assess potential adjustments—including the feasibility of a separate private-hire category—its goal is to strike a balance that ensures accessibility, affordability, and sustainability.
Local buyers have emerged as a significant force in shaping COE trends, but the system’s inherent complexities require ongoing evaluation and refinement. For car owners, dealers, and policymakers alike, staying informed and adaptable will be key to navigating Singapore’s competitive automotive market.
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