SINGAPORE — A Potential Wave of Change in the Car Market

The recent announcement of a potential injection of 20,000 Certificates of Entitlement (COEs) into the car market is causing ripples among dealers and buyers alike, who fear the short-term impact on sales as consumers adopt a cautious approach to their purchases.

With the additional COEs set to roll out across various vehicle categories from February 2025, many prospective buyers are holding back, anticipating a dip in car prices. Industry voices are calling for transparency regarding the distribution timeline and the categories in which these COEs will be allocated.

For the first time in over two decades, this move comes in anticipation of the rollout of ERP 2.0—a new system by the Land Transport Authority (LTA) featuring virtual gantries designed to enhance traffic management in Singapore.

Dealers Express Concern Over Market Instability

Car dealers are expressing concern. Neo Nam Heng, chairman of the diversified motor group Prime, noted, “Why would anyone pay S$115,000 (US$87,000) for a Category B car when prices could plummet soon?” Indeed, the average COE premium for larger and more powerful vehicles like those in Category B has already soared to S$116,002 this year.

Adding to the dealers' apprehension, Benjamin Loo, Chief Operating Officer of Cartimes Automobile, agrees that a slowdown in business is imminent. “People are understandably hesitant to make a big purchase when they fear it could be overpriced,” he explained.

A Glimmer of Optimism Amidst the Uncertainty

Interestingly, some dealers remain somewhat optimistic. Loo indicated that a slowdown in purchases might actually give rise to lower COE prices, which could subsequently spur a surge in demand later. "If customers hold off now, COE prices could drop dramatically, and that’s good news for everyone involved," he suggested, pointing out the core principle of supply and demand.

The expectation of lower bids from dealers is also at play. Neo Tiam Ting, president of the Singapore Vehicle Traders Association, highlighted that as dealers brace for a future drop in COE premiums, they are likely to lower their bids now, which could lead to decreased prices even before the official COE issuance in February 2025.

Potential Financial Strain for Dealers of Second-hand Cars

However, it’s important to note that in this transitional phase, dealers with second-hand cars may experience significant losses. Neo emphasized that if COE prices decrease, the prices of existing used vehicles will likely follow suit, leading to financial strain for those holding outdated inventory.

Call for Clarity on COE Distribution Timeline

With the LTA's vague timeline for COE injections—stated to occur "over the next few years"—dealers are urging for clarity. Neo from Prime remarked, “We need specifics on how these 20,000 COEs will be allocated. If it's stretched over several years, the impact might be minimal. But if it’s concentrated over a shorter period, we could see COE prices falling below S$100,000, fundamentally altering the market.”

Consumers Caught in the Crossfire

Consumers, too, are left feeling in the dark. With uncertainties looming, they might refrain from buying a vehicle today only to see prices drop drastically in the near future. "Without clear information, consumers are at a disadvantage," Neo stressed. “We need transparency so that potential buyers can accurately plan their purchases without the fear of losing out on better deals.

As the car market braces for change, both dealers and consumers await more information on these impending COE injections that could reshape their buying experience and the financial landscape of car ownership in Singapore. Will you risk waiting, or are you ready to seize the moment before prices tumble?