Ministry of Transport Announced “Cut-and-Fill” Strategy to Address COE Supply Trough

Singapore’s Certificate of Entitlement (COE) system has been under scrutiny, and the government has recently announced measures to tackle the challenges posed by rising COE prices and supply fluctuations.

Singapore’s Strategy to Tame COE Price Volatility

In a bid to maintain a balance between controlling the number of vehicles on the road and addressing the concerns of motorists and businesses, the Transport Ministry has revealed its strategy to manage the COE system. 

To address this issue, the government is adopting a “cut-and-fill” approach, which involves bringing forward COEs from future peak supply years (2026 and 2027) to fill the current supply troughs. This strategy aims to stabilise COE prices while maintaining the zero-growth policy.

In this article, we will explore the key points discussed by Acting Minister for Transport Chee Hong Tat.

Reducing Price Volatility while Maintaining Zero-Growth Policy Singapore’s zero-growth policy, aimed at managing traffic congestion in the land-scarce nation, forms the foundation of the COE system.

The number of COEs available for bidding is determined by the number of deregistered vehicles. 

However, the large difference in COE supply between peak and trough years has led to significant price volatility.

Source: ST Photo

Increased COE Supply

In May, the Land Transport Authority (LTA) initiated the practice of bringing forward COEs from “guaranteed deregistrations” in peak years, resulting in increased COE supply over the past six months. 

Furthermore, the LTA recently announced the injection of an additional 1,614 COEs for cars and commercial vehicles between November 2023 and January 2024. 

This increased supply is expected to have a positive impact on COE prices, though the ultimate outcome will depend on market demand.

Impact on Commercial Vehicles and Motorcycles

Acting Minister  Chee Hong Tat also addressed the concerns of businesses and commercial vehicle owners, assuring them that the quota supply for Category C (goods vehicles and buses) will continue to increase in 2024 and beyond before reaching a peak in 2026. 

For Category D, which pertains to motorcycles, the government does not plan to increase the growth rate in line with the zero-growth policy. 

However, it recognises the importance of motorcycles for lower-income individuals and offers lower taxes and fees for this category.

Source: CNA/Jeremy Long

Car-Leasing Companies and Their Influence

The role of car-leasing companies in the rise of COE prices was also discussed.

Contrary to assumptions, data shows that COE prices have increased at a time when demand from car-leasing companies has decreased. 

This implies that car-leasing companies are not the primary factor driving up COE prices. The government is open to exploring alternative solutions to address the concerns related to these companies, which play a significant role in point-to-point services in Singapore.

Foreign Buyers and Multiple-Car Owners

It was also clarified that rising COE prices in recent months were not driven by foreign buyers. 

Moreover, imposing additional taxes on households with multiple cars is unlikely to significantly affect COE prices, as such households represent a small proportion of the market. The government aims to make data-driven decisions to address these concerns effectively.

Source: CNA/Jeremy Long

Speculative Bidding and Consumer Protections

To mitigate speculative bidding behaviour, the government has introduced measures such as raising the Temporary COE bid deposit and reducing its validity period for Category D (motorcycles). 

These measures have led to a reduction in Category D prices. Additionally, the government will take action against dealers making false claims or misleading representations to consumers in vehicle transactions to ensure consumer protection and market integrity.

Navigating Singapore’s Evolving COE Landscape

The recent announcements by the Singaporean government regarding the COE system demonstrate its commitment to addressing the concerns of motorists, businesses, and the public while maintaining the zero-growth policy. 

The “cut-and-fill” approach, increased COE supply, and measures to combat speculation aim to stabilise COE prices and create a more predictable environment for buyers. 

As the government continues to study ways to improve the COE system, the evolving landscape of Singapore’s transportation policy will be closely monitored. 

While the outcome remains uncertain, these steps indicate the government’s responsiveness to the challenges posed by the COE system in Singapore.

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Featured Image from CNA 

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