WP’s Jamus Lim pushes for structural COE reforms to curb price fluctuations

SINGAPORE: Associate Professor Jamus Lim, Workers’ Party Member of Parliament for Seng Kang GRC, has once again emphasized the urgent need for reform in the current Certificate of Entitlement (COE) system.

His proposal includes a call to balance annual vehicle quotas, aiming to eliminate the cyclical fluctuations inherent in COE prices.

Assoc Prof Lim strongly believed that such reforms are essential to prevent situations where prices surge during periods of limited quotas and sharply decline when quotas are abundant.

Earlier on 7 November, WP MPs filed a motion to debate Singapore’s persistent cost of living pressures, and advocated for structural changes, to better alleviate the pressures on the ground.

Assoc Prof Lim particularly highlighted the escalating transport costs, honing in on COE prices, especially concerning cars.

He highlighted how these escalating prices have significantly contributed to the overall surge in transportation expenses lately, pointing out the limitations in the government’s efforts to address the persistent spikes in COE prices.

During the motion debate, Assoc Prof Lim proposed several measures.

Firstly, he advocated for the balanced distribution of vehicle quotas by transferring excess quotas from high-supply years to those with lower supply, aiming to establish a more equitable quota distribution in the years to come.

Additionally, he recommended a reform in the bidding process by suggesting payment solely based on the bid amount or by setting bids as a percentage of the vehicle’s open-market value, thereby fostering a more progressive system.

Furthermore, Assoc Prof Lim suggested a reconfiguration of the COE market structure. This includes considering the removal of the open category and establishing a specific category tailored for vehicles primarily used for commercial purposes or Electric Vehicles (EVs). He also proposed the exclusion of dealers from participating in the bidding process, among other potential changes.

Car ownership’s bread-and-butter reality for ordinary Singaporean families

Assoc Prof Lim’s recent Facebook post on Wednesday (22 Nov) presented an analysis of the flaws within the current COE system and outlined his proposed solutions to address them.

He debunked the notion that COE prices only concern the elite, emphasizing that two in five households own a car.

“Many of these are just regular families, many with young children, for which wheels help get kids to classes, pull off grocery runs, and make work appointments. ”

“Others are those with an elderly or dependent with medical needs, for which a reliable ride becomes almost a necessity.”

Highlighting the trickle-down effect, Assoc Prof Lim underscored that expensive car COEs impact not only individual car owners but also spill over into the costs of semi-public transportation options like taxis, rideshares, and even low-cost alternatives such as motorbikes.

His proposed solution revolves around balancing annual vehicle quotas, addressing the inherent issue of fixing quotas based on the number of cars registered in the initial decade of the COE system.

“This has led to a frustrating cycle of feast and famine: in years where quotas are scarce (like recently), COE prices go through the roof; in years where quotas abound, prices plummet.”

Assoc Prof Lim referenced a recent statistic from The Straits Times, emphasizing the decisive role of supply in influencing COE prices.

Assoc Prof Lim highlighted the necessity to prevent the frustration of quota reallocation caused by COE “horsetrading” in Singapore.

This behaviour involves some individuals strategically trading their vehicles during periods of scarcity (“famine years”) before the typical ten-year lifespan, aiming to take advantage of lower-priced COEs during periods of abundance (“feast years”).

To curb this practice and ensure a fairer allocation of COEs, Lim proposed discontinuing the reimbursement of trade-in COEs at face value.

This measure aims to discourage manipulative behaviours within the COE market.

Jamus Lim proposes differential pricing for high-use private hire cars

Jamus Lim then discussed the impact of private hire cars (PHCs) on the demand for COE.

He acknowledges that while PHCs contribute positively to the country’s transport system by providing employment opportunities and diversity, they also add to the overall demand for COEs.

Notably, Acting Minister for Transport Chee Hong Tat had earlier dismissed the notion of car leasing firms fueling COE price surge, in which he clarified that the data shows that COE prices “have gone up in a period when demand from car leasing companies has come down”.

However, Lim suggested that this denial overlooks a critical aspect, “would COE prices be even lower, had we removed PHCs from the Cat A/B pool? ”

He highlighted that over the past decade, the number of PHCs has increased substantially, and their demand primarily stems from commercial motives.

This inclination towards commercial utilization implies a greater willingness to pay higher COE prices compared to households seeking cars for personal use, contributing to increased COE prices.

To address this issue, Lim proposed treating heavy-use PHCs similarly to taxicabs by having them draw from a different COE category (Cat E – Open) while paying prices from another category (Cat A/B).

“This keeps the demand pressure in only one category, which we can think of as a “penalty” category, ” he said.

“This is where you would also place buyers of 2nd cars. Even if this group of buyers is small, their demand can escalate prices, due to their stronger purchasing power.”

Direct buyer COE bidding to combat industry concentration

In his Facebook post, Assoc Prof Lim also acknowledged the convenience offered by the car-COE bundle but highlighted that this practice has led to industry concentration and potentially increased costs of car ownership.

He suggested considering a shift where buyers directly bid for COEs, with dealers offering advisory services for a fee, thereby potentially reducing industry concentration.

Assoc Prof Lim further suggested refining the motorcycle category in the COE system.

He emphasized the importance of bike COEs in meeting private transport demand, particularly for commercial use, and noted that motorcycles have a smaller road footprint.

He characterized these proposed changes as solid reforms for the existing COE system.

Jamus Lim urges decisive structural reforms to preserve Singapore’s urban transport success

He said the government appears to have taken “baby steps” in this direction, with the “cut-and-fill” of quotas, and criticized the tentative nature of the current moves.

He highlighted the importance of not just addressing the immediate high-COE problem but committing to lasting structural reforms to prevent future price escalations.

“The quota system with COEs has been an urban transport success, helping keep Singaporeans roads relatively jam-free, compared to other major cities worldwide.”

In the latest COE bidding in Singapore, smaller car premiums fell, while those for larger cars and the Open Category rose. Category A premiums decreased to S$85,001, while Category B and Open Category increased to S$135,336 and S$135,002, respectively. Commercial vehicle and motorcycle premiums also declined.

This follows a quota increase and precedes an expected COE supply rise from mid-2024, peaking between 2026-2027, as part of Singapore’s zero-vehicle growth policy.