COE quota to expand 5.3%, growth rate cut

Singapore

THE good news on certificates of entitlement (COE) is that supply will rise slightly from November, but the bad news is that the annual vehicle growth rate will be halved from February. In line with the latter, the contribution rate to the open category, Cat E, will also be cut.

From November 2014 to January 2015, the COE quota will be up 5.3 per cent to 11,932, with the additional 601 COEs benefiting mainly the small car, big car and open categories.

Category A - for cars below 1,600 cc or 130 hp - gets an extra 253 COEs each month to 1,396, or a 22.1 per cent increase over the current August to October 2014 quota.

Cat B - for cars above 1,600 cc and 130 hp - enjoys 1,138 COEs or 128 more (up 12.7 per cent), while Cat E - the open category - will have 527 monthly (up 10.3 per cent).

Cat D - for motorcycles - will be higher too but marginally: three more COEs to 634 (up 0.5 per cent).

But Cat C - for goods vehicles and buses - is set to contract sharply by 45.2 per cent from 515 to 282 COEs, or a whopping 233 fewer COEs per month due to the success of the Early Turnover Scheme (ETS).

Under ETS, the owner of an existing commercial vehicle does not bid for a COE but instead pays a pro-rated COE based on the prevailing quota premium, meaning each new vehicle registered under ETS reduces the number of COEs available in the upcoming quota.

According to the Land Transport Authority, the number of replacements under the ETS has increased significantly since the enhancement of the ETS in March 2014. While the total number of deregistrations has not increased significantly, the replacements under the ETS have more than trebled, from about 20 per cent before the enhancement to 70 cent in the third quarter of 2014.

"This means that more Cat C COEs are being made available directly in the market, rather than through the bidding system,'' the LTA said. "While this leaves fewer Cat C COEs available for bidding, it also means that potential buyers can obtain new vehicles coupled with a ready COE, without needing to bid for a new COE through the open bidding system.''

In determining the COE quota, the Land Transport Authority considers three factors:

- The 0.5 per cent per annum vehicle growth rate based on the vehicle population as at Dec 31, 2013;

- The replacement COEs for vehicles deregistered in the preceding three-month period; and

- The adjustments for changes in the taxi population, expired COEs and over-projection of vehicle deregistrations in 2008/2009.

But from February 2015 to January 2018, the annual vehicle growth rate will be cut to 0.25 per cent, with a review in 2017. In explaining the reduction, the LTA said there is limited scope for further expansion of the road network. With the vehicle population close to one million (972,438 in August), and the ongoing expansion of the public transport network, "it is not tenable to keep to the same rates of vehicle population growth as before''.

But it added that the lower vehicle growth rate is "not expected to substantially impact the COE supply as this is determined mainly by the number of vehicle deregistrations''.

"This is especially so in view of the generally rising trend of deregistrations in the coming years, as the COEs of many old vehicles expire.''

To maintain a more stable supply of COEs in each COE category under a lower vehicle growth rate, the LTA will also lower the contribution rate to Cat E from the current 15 per cent to 10 per cent from February 2015 onwards.

Currently, 15 per cent of COEs from deregistered vehicles in each category - A to D - form the COE quota for Cat E, the open category.

"This reduction will return more COEs from deregistered vehicles to their respective categories. The immediate effect on quotas available for each vehicle category is expected to outweigh the reduction in vehicle growth rate.''