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What the COE quota increase really means.

By Deeq on 19 Jul 2018 in Uncategorized, Other blogs

Attached Image So the recent news mentioned that the total COE quota for the next 3 months will increase, but what does that really mean? Lets go through the details one by one.

Quota increase doesn't mean COE price increase...
Its a common misconception that COE quota increase means the price will increase, its actually more likely to go the other way round. COE price fluctuates according to demand and supply, as we know, more demand and less supply leads to price increase in most cases. In a case where the COE quota increases, that simply means supply has increased, so if the demand stays stagnant, the COE price may fall.

Increase in total COE quotas may not mean all COE categories has increased...
For this case, if you read the news properly, the biggest increase in quota is for Cat D, which is for motorcycles, followed by Cat A, which is for Passenger Cars with Engine Capacity not more the 1600cc, and horsepower not more than 130bhp. As for Cat B and Cat E(Cat E is an open Cat that you can use for any vehicles, typically used for Cat B vehicles), the quota has dropped slightly, which means it is likely that the COE price may hover around the current price, or even rise slightly.


Attached Image
Demand may grow when supply grows...
Upon hearing the big news of COE price dropping to $25k, this might drive car buyers to rush for a new Cat A car before it goes up again, and, since COE is a fixed supply, this may actually in turn raise the COE prices again gradually for the coming months. As you can see from the above graph for COE results this year, almost everytime the COE goes down, it goes back up again the next round. Also note that the current sharp fall is mainly due to the new VES tax which was implemented on the 1st of July 2018, where most car buyers rushed to get their cars registered before the said date.

First of all, some may not understand that the current COE price you see, is the bidding result for those who bidded before that COE date. Meaning, the COE price that was released on the 4th of July 2018, where is was $25k for Cat A, is the price for those who signed for the car before the 4th of July. The next COE, which is yesterday (this article is released at 12 noon on 19th July), is the price buyers who signed for the car before yesterday's COE will have to pay. This means that if you purchase a car today, your COE price is still unknown, as the next bidding will be on the 8th of August 2018. But of course, COE's dont often fluctuate by a lot, in normal situations, COE prices fluctuate by about 10-20% at most, so the previous COE can be taken as a rough estimation of what the next COE price will be.

Attached Image So to sum things up, yes the rise in COE quota for Cat A may likely drop the COE prices in the coming months, but its hard to tell how much it will drop as there are several factors that affect car buying behaviors. As we saw from yesterdays COE, where Cat A ended at almost $33k, the rise of about $7k shows that whenever the COE drops sharply, it is likely to rise sharply again. And we can only guess what will happen when the Cat A quota rises in the next 3 months, and my guess is that it may see a gradual drop in Cat A COE price by about 20-30%

coe, car buying, car prices and 1 more...

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Deeq
Written by Deeq
With intense love for cars and bikes since little, and passion for photography, Siddiq tries hard to bring cars to life on the screen, proving his worth as well as his passion for the job.



LPPL Jul 20 2018 03:26 AM
The entire COE scheme is crap, just a way for the govt to rip people off!
Jwee85 Jul 20 2018 03:01 PM

This article is just to fill space?

Seems like "Say already like no say".

 

A newbie who read this article will be stymied.

Vinceng Jul 20 2018 06:26 PM

The first bid in July when Cat A COE crashed to $25K was caused by an online technical glitch where repeated attempts to submit bids online failed.

Active bidding usually starts  30 minutes before bidding ends.

 

Once bitten, twice shy, during the 2nd bid in July on 18 July, 90% of bids were submitted 3 hours before bidding ended. 

MQX87511 Jul 21 2018 12:34 PM

don't understand, since Gov already car yearly increase rate is 0%, why there is a COE quota increased, if it will lead next quarter COE quota shrink to retain yearly 0% car increase rate?

Coolant Jul 21 2018 03:55 PM

don't understand, since Gov already car yearly increase rate is 0%, why there is a COE quota increased, if it will lead next quarter COE quota shrink to retain yearly 0% car increase rate?


the increase in COE for next 3 months is due to higher numbers of cars having been scrapped the previous 3 months, so the equivalent numbers of COE were added back into the pool of certs.

govt announce 0% growth, so they are not adding more new COE into the pool (unlike in previous years), so the total car population numbers will still stay the same now.
LPPL Aug 03 2018 07:39 PM

lots of spammers in mcf. Time to ban 'vorond'

 
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