Does the COE System Need a Radical Overhaul? A Comprehensive Exploration of Alternatives

As household incomes in Singapore are set to rise, coupled with the government’s zero-growth policy for the car population, the inevitable long-term trajectory for Certificate of Entitlement (COE) prices is an upward trend. 

COE Prices Hit Record Prices 

The recent surge in COE premiums, reaching unprecedented levels in October’s second bidding round, has also reignited discussions on the need for a radical overhaul of the 33-year-old bidding system.

In light of the ongoing debate, let us delve into some alternative policy amendments that we have seen proposed around the internet while we examine the potential benefits, challenges, and expert opinions associated with each. 

1. Tax Usage More Than Ownership


Adjust the current system to tax drivers more for actual road usage rather than imposing hefty upfront taxes during the car purchase.


Usage-based road pricing emerges as a direct approach to maintaining relatively congestion-free roads. By making driving more costly from the first mile, this model aims to encourage a “car-lite” society while ensuring a marginal growth in the overall car population.


Balancing the tax structure becomes crucial. While deterring excessive driving is the goal, policymakers need to avoid discouraging car ownership entirely. 

Striking the right balance is essential for realizing the vision of a “car-lite” society while allowing for moderate car population growth.

Expert Opinion:

Transport economists emphasize the importance of finding the delicate equilibrium to avoid unintended consequences on both driving habits and overall car ownership.

2. Create a Separate COE Category for PHVs


Introduce a new COE category specifically for Private-Hire Vehicles (PHVs), separating them from the general private car COE bidding pool, akin to the treatment of taxis.


The surge in private-hire chauffeurs and self-drive cars on Singapore’s roads has led to a perception that they contribute significantly to the rising COE prices. 

Creating a distinct COE category for PHVs aims to mitigate competition in the general pool and address the perceived impact of their growth on premium costs.


Contention arises regarding the fairness of this model.

Some argue that limiting PHVs in COE bidding may be akin to hindering healthy competition. Alternatively, reframing PHVs as part of the solution, given their potential to serve more people through increased car-sharing, challenges the perception of them being a problem.

Expert Opinion:

Experts caution against viewing PHVs solely as a problem and urge a more nuanced perspective that considers their role in evolving transportation models.

3. Adopt a Lottery Mechanism


Implement a lottery system for COE distribution, removing the system’s exposure to market forces. 

Unused allocations could be reclaimed, subject to auction, allowing broader access to vehicle ownership.


This approach seeks to democratize vehicle ownership, providing every Singaporean, regardless of income level, an equal chance to obtain a COE.


A potential reduction in COE revenue for the government poses a challenge. 

While COE contributions account for just over 3% of Singapore’s annual budget inflows, any reduction could impact the government’s budgetary considerations.

Expert Opinion:

Experts acknowledge the potential revenue impact but highlight the broader societal benefit of providing equitable access to vehicle ownership.

Crafting a Balanced and Sustainable Future for Singapore’s COE System

In conclusion, as Singapore grapples with the complexities of COE pricing and considers potential reforms, each proposed alternative comes with its own set of challenges and nuances.

Striking the right balance between managing demand, promoting a “car-lite” society, and ensuring fairness remains a formidable task.

As policymakers deliberate on the way forward, a holistic approach that considers multiple perspectives and potential unintended consequences will be essential to shaping a sustainable and effective COE system for the future.

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