From February 19, 2025, businesses in Singapore must keep their private-hire cars (PHCs) designated for ride-hailing services for at least three years before converting them to passenger cars or transferring them to individuals.
This new regulation, introduced by the Land Transport Authority (LTA), aims to stabilise the supply of vehicles available for point-to-point transport services and prevent premature conversions that could disrupt the ride-hailing market.
Background and Rationale for the Rule
Previously, businesses had the flexibility to convert their PHCs into passenger cars without any restrictions.
This led to volatility in the supply of PHCs, as some companies registered more PHCs than necessary and later converted them to passenger cars for sale.
Between January 2022 and August 2024, approximately 1,500 PHCs were converted out of the scheme annually within their first three years.
LTA’s new three-year lock-in period ensures that PHCs remain within the ride-hailing ecosystem for their intended purpose.
It also prevents businesses from using the PHC scheme to obtain COEs at lower rates and then flipping the vehicles for profit.
Unintended Early Release of Information
Interestingly, the announcement of this policy change was not initially planned before the February 19 COE bidding exercise.
However, a premature release of the information by LTA’s IT vendor, NCS, on February 16 led to unintended early dissemination of the rule.
As a result, LTA decided to bring forward the policy’s implementation date to ensure fairness and transparency in the market.
How the Lock-In Period Works
The three-year lock-in period applies to:
- Vehicles registered as chauffeured PHCs by businesses from February 19, 2025, onwards.
- Vehicles converted into PHCs by businesses from February 19, 2025, onwards.
- PHCs transferred from individuals to businesses from February 19, 2025, onwards.
Notably, business-owned PHCs with an existing lock-in period can still be transferred to another business, with the remaining lock-in duration carried over.
However, these PHCs cannot be transferred to individual ownership until after the three-year period expires.
Industry Reactions and Implications
The new rule has sparked mixed reactions from stakeholders in the industry.
Associate Professor Walter Theseira, a transport economist at the Singapore University of Social Sciences, noted that the measure brings “some parity” to how taxis and PHCs are treated.
He also highlighted that the influence of PHC demand on COE prices has been shrinking, given that the supply of COEs is expected to increase in the coming years.
Meanwhile, the National Private Hire Vehicles Association (NPHVA) believes the regulation will promote responsible fleet management by rental car providers, potentially leading to fairer rental agreements for drivers.
However, some in the automotive industry are concerned about how this will impact businesses that engage in short-term leasing of PHCs.
Impact on the COE Market
One of the main concerns surrounding this policy change is its potential impact on COE prices.
Some industry observers had previously speculated that the high demand for COEs was driven in part by car leasing companies aggressively bidding for them.
However, in November 2024, Transport Minister Chee Hong Tat refuted these claims, stating that COE prices were mainly driven by strong demand from local individual buyers rather than car leasing firms.
At the February 19 COE bidding exercise, LTA reported that leasing companies accounted for only 6% of successful bids for smaller cars and electric vehicles, and 8% for larger cars and electric vehicles.
This suggests that while PHC leasing companies do participate in COE bidding, they are not the primary driver of price fluctuations.
What’s Next for the Ride-Hailing Sector?
The new regulation is part of a broader review of the point-to-point transport sector that began in 2023.
Senior Minister of State for Transport Amy Khor stated that the review aims to improve the availability and reliability of taxis and PHCs in Singapore.
With the lock-in period now in place, the market may see greater stability in the supply of PHCs, reducing abrupt fluctuations.
However, businesses operating in the ride-hailing and car leasing industry will need to adapt to these new constraints. More updates on the sector review are expected in Parliament in March 2025.
Conclusion
LTA’s introduction of a three-year lock-in period for business-owned PHCs marks a significant regulatory shift in Singapore’s ride-hailing industry.
While the move is expected to stabilize the supply of PHCs, it also poses challenges for businesses that previously relied on the flexibility of converting and reselling these vehicles.
As the industry adapts to these new rules, the long-term impact on the ride-hailing market and COE prices remains to be seen.
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