Singapore LTA increases COE supply to combat record-high vehicle premiums

SINGAPORE: The Land Transport Authority (LTA) has announced an increase in the supply of Certificates of Entitlement (COE), which are essential for vehicle ownership in Singapore. An additional 1,614 COEs will be introduced into the pool over the next three months. This is on top of the reallocation of 1,895 COEs for smaller and larger cars from the guaranteed deregistrations.

The biggest boost is in the category for larger cars, with engines above 1,600cc or 130bhp, and electric vehicles (EVs) above 110kW, which will see an increase of 863 COEs. This is a 22.4 per cent increase, raising the total to 3,800 COEs available for this category.

For smaller cars and EVs with a power output of up to 110kW, there will be an additional 546 COEs, an 11 percent increase leading to a total of 5,513 COEs.

Commercial vehicles will also see a boost with an additional 205 COEs, taking their total to 1,129 for the November to January period.

The LTA stated, “Potential buyers may want to take note that the COE quota for Categories A, B, and C will continue to increase in 2024 before reaching the peak supply period from 2025, while Category D quota in 2024 is expected to remain comparable to 2023’s.”

This influx comes amid a period of exceptionally high COE premiums, with the premium for larger cars ending at a record $150,001, and the Open category, mostly used for larger cars, at $158,004.

The LTA’s move is seen as a way to address the high COE premiums that have been a point of concern. With the next COE tender closing on November 8, this development is particularly relevant.

In response to the volatile COE supply, LTA has adjusted the COE quota calculation twice, in July 2022 and January, to be based on the rolling average of vehicle deregistrations over a longer period, thereby reducing the quarter-on-quarter fluctuations.

The Transport Minister S Iswaran explained during a ministerial statement on 8 May that a one-off exercise would redistribute approximately 6,000 five-year COEs to help lessen the volatility in supply.

He then clarified, “There will still be a degree of supply fluctuation due to historical factors and broader market conditions.”

Minister Iswaran also provided insight into the long-term trends of COE prices, indicating that “the COE supply is also expected to ‘start increasing substantially’ in the coming months as more cars reach the 10-year mark, which should ease the market.”

However, he cautioned that the upward trend in COE prices is likely to continue due to the combined effect of rising incomes and the policy of zero vehicle population growth.

Mr Iswaran, who has been suspended over a corruption probe, posited that even though COE prices have risen in absolute terms, “if one were to compare COE prices to median income, such prices are actually lower because household income has risen.”

The issue of high COE prices remains a hot topic, set to be addressed by Members of Parliament in the upcoming parliamentary session next Monday. The rising COE premiums, the impact on Singaporeans, and the government’s intended measures to tackle the situation are poised to be key points of parliamentary debate.