COE - AN EXPLANATION

[Darryn]

There seems to be a bit of misunderstanding about some aspects of COE so here goes..

 

1. The Govt sets a monthly number of new cars they want to see on the road.

2. This is how many COE they release

3. Drivers bid on how much they are willing to pay to own a car

4. More people willing to pay = price go up. Less people willing to pay = price go down.

 

The PRICE of the COE has nothing to do with how many COEs sell - it is the SUPPLY that determines the price, not the price that determines the supply

 

A. From April, the govt is allowing a 1.5% annual growth in vehicle population. So if there were 100,000 cars as at March 31 2010, as at March 31 2011 there will be 101,500 - or ADDITIONAL 1,500 cars on the road

B. BUT the govt is cutting the number of new cars due to previously allowing too many cars to be registered (because of bad estimates)

C. The amount of this cut is 28% (I think), so ACTUAL increase is 1,500 - 28% = (approx) 1,100

D. The number of COE issued = NUmber of cars deregisted in the previous month + current growth

 

PART B

 

Why does a higher COE lead to a switch towards more "luxury" cars

 

This is debatable, but here's my take on it.

 

But first assumptions

COE X = $10,000

COE Y = $40,000

 

Basic Car = $50,000 (excluding coe)

Luxury Car = $65,000 (excluding coe)

At low COE, the jump from a Basic to a Luxury car is from $60k to $75k, or 25% - this is a pretty big jump.

 

At high COE the jump from Basic to a Luxury car is from $90k to $105K or approx 14% - the comparative jump is much less, so the "luxury" car feels like a more "worthwhile" purchase. The gap in price has narrowed, but the gap in quality has remained the same. So the COMPARATIVE value of the luxury car has gone up.

 

Explanation B.

 

As the COE goes up, the marginal or "only just afford it" buyer is squeezed out, leaving (more of) the people that don't care about the cost, but rather the car they are buying. Those that are at this end of the market tend to buy the more "luxury" cars

 

 

 

 

[Jman888]

shame on us, need a foreigner to explain what is COE...

 

not unless you work for LTA!

[Hamburger]

i ans on their behalf as tis is e SOP ans all along....its all mkt forces

[Darryn]

shame on us, need a foreigner to explain what is COE...

 

not unless you work for LTA!

 

Nah...but I did study economics. In my class the COE system singapore uses was cited as the second most "efficient" way to get the maximum revenue from a set number of items.

 

I am sure that any economist would be familiar with the theory driving COE and why it is so "clever" when it comes to a price setting mechanism.

 

I must also add, that much as I hate the price of cars in Singapore - I think its far better that the govt "controls" the vehicle population* via a transparent "license to own" system than taxes. or some other murky waiting list, lottery or anything else.

 

* If you subscribe to the idea that the vehicle population needs to be controlled.

[Joycechua]

Nah...but I did study economics. In my class the COE system singapore uses was cited as the second most "efficient" way to get the maximum revenue from a set number of items.

 

I am sure that any economist would be familiar with the theory driving COE and why it is so "clever" when it comes to a price setting mechanism.

 

I must also add, that much as I hate the price of cars in Singapore - I think its far better that the govt "controls" the vehicle population* via a transparent "license to own" system than taxes. or some other murky waiting list, lottery or anything else.

 

* If you subscribe to the idea that the vehicle population needs to be controlled.

Can it be controlled? so many cars along CTE today..

[Longhorn]

haha darryn.. you r more singaporean than us. just to add an observation. in practical application, drivers do not directly bid for the COEs. The car distributer does that. Unfortunately they control the game. You cannot tell the car dist to bid say $X or $Y. Car distributer decides how much he wants to bid and whether to even bid for u in the first place.

 

there are some exceptions of cos. but the big boys control the game. we r merely pawns hoping to get our rides. :)

[Longhorn]

Can it be controlled? so many cars along CTE today..

COE controls population...not usage.

 

ERP controls usage..

[Darryn]

Can it be controlled? so many cars along CTE today..

 

Of course can be controlled - many many ways.

 

Govt is doing one way - only allow X number of cars to be sold in Singapore.

 

Can also control by putting entry gantries at EVERY slip road - if your car dun have license to drive on that road, sorry, no entry.

 

Just a matter of how intrusive you wanna get.

 

Currently govt only control absolute number of vehicles, not where they drive. Control where they drive by ERP - but is not so exact a science and issuing licenses - plus point is that it's mroe flexible and easier to administer.

[Robo]

Can it be controlled? so many cars along CTE today..

u really siam from the thread ah?

[Darryn]

haha darryn.. you r more singaporean than us. just to add an observation. in practical application, drivers do not directly bid for the COEs. The car distributer does that. Unfortunately they control the game. You cannot tell the car dist to bid say $X or $Y. Car distributer decides how much he wants to bid and whether to even bid for u in the first place.

 

there are some exceptions of cos. but the big boys control the game. we r merely pawns hoping to get our rides. :)

 

Hee. Yep, they do.

 

But just to note - I got my car from PI - I told him how much I was willing to pay.

 

And also, it is implicit in the price how much you are willing to pay (for a COE) when you buy from the AD.

 

There is also a mechanism to buy your own COE if you wish - its just that the AD skew the game by penalising you if you buy a car ex-COE (which should be a big clue that tells you they are "gaming" you)

 

Yeah, and it sucks that the AD take everybody for prawn - people should really try and take control back from them.

 

My personal opinion?

 

ALL cars should be sold at a base price EXCLUSIVE of COE

The buyer should give a number to the AD of how much he willing to pay.

AD should bid on his behalf up to this maximum.

Once secure, the price of the COE is added to the base price of the car.

 

I don't like all this "package price" rubbish....

 

But that's just me, others may well prefer it (as it gives "certainty"when buying a car)

[Tigerwoods]

Hee. Yep, they do.

 

But just to note - I got my car from PI - I told him how much I was willing to pay.

 

And also, it is implicit in the price how much you are willing to pay (for a COE) when you buy from the AD.

 

There is also a mechanism to buy your own COE if you wish - its just that the AD skew the game by penalising you if you buy a car ex-COE (which should be a big clue that tells you they are "gaming" you)

 

Yeah, and it sucks that the AD take everybody for prawn - people should really try and take control back from them.

 

My personal opinion?

 

ALL cars should be sold at a base price EXCLUSIVE of COE

The buyer should give a number to the AD of how much he willing to pay.

AD should bid on his behalf up to this maximum.

Once secure, the price of the COE is added to the base price of the car.

 

I don't like all this "package price" rubbish....

 

But that's just me, others may well prefer it (as it gives "certainty"when buying a car)

I totally agree on the AD & PI should sell Base price without COE. Their struggle to get more COEs to push out more cars are AT BUYERS EXPENSE and does not benefit us at all.

 

If we are force to bid our own COE, then they die die will attract us with lowest sell price .

 

I still think PAY AS YOU BID system is the fairest way...

You anyhow bid High does not mean I kena penalise for your stupidty... That is whats happening now...

[Richardlimbs]

nooo... the govt will not allow pay as you bid. As there will be many who will try to bid $1 every round and hope to get a fluke result where there are more COE available then bidders.

[Ben5266]

More info on COE.

Cat A Cat B Cat C Cat D total

2000 286921 114308 135723 133466 670418

2001 286717 124790 131274 131070 673851 -0.07% 9.17% -3.28% -1.80%

2002 294100 130225 133897 130978 689200 2.58% 4.36% 2.00% -0.07%

2003 286944 136587 132607 131510 687648 -2.43% 4.89% -0.96% 0.41%

2004 278935 145923 131852 134838 691548 -2.79% 6.84% -0.57% 2.53%

2005 279036 158609 133814 136192 707651 0.04% 8.69% 1.49% 1.00%

2006 290255 170449 135633 138662 734999 4.02% 7.46% 1.36% 1.81%

2007 307885 187776 140646 141950 778257 6.07% 10.17% 3.70% 2.37%

2008 329299 209841 146889 143524 829553 6.96% 11.75% 4.44% 1.11%

2009 344356 230401 151922 145348 872027 4.57% 9.80% 3.43% 1.27%

2010 357693 244006 154234 146404 902337 3.87% 5.90% 1.52% 0.73%

 

[Benarsenal]

Apparantly, when COE was first introduced, the logic was:

 

Buyer go bid for a COE first.

When he get a COE, then go and buy his car.

 

I dunno if that's a better way of doing things. Thoughts?

[Ben5266]

Cat B was growing at 10% per year for the last 3 years.

Only to slow down in 2009-2010 when the growth rate is changed to 1.5%.

So, LTA missed their KPI very badly.

Target 3%. Actual 11.75% in 2008!

Obviously, this is not the case of missed target.

The growth is more politically motivated.

 

[Darryn]

Apparantly, when COE was first introduced, the logic was:

 

Buyer go bid for a COE first.

When he get a COE, then go and buy his car.

 

I dunno if that's a better way of doing things. Thoughts?

 

Yes and no.

 

On major problem may be, what if get a Cat A COE, but end up wanting to buy Cat B car? Then got headache right?

 

Then also, what about delivery times for cars? If the AD cannot deliver the car you want? Then also got headache.

[Benarsenal]

Yes and no.

 

On major problem may be, what if get a Cat A COE, but end up wanting to buy Cat B car? Then got headache right?

 

Then also, what about delivery times for cars? If the AD cannot deliver the car you want? Then also got headache.

 

First problem, that would ensure that buyers think carefully before getting their COE, and don't just go and bid anyhow.

 

Second, well, consumers should have more bargaining power. They can say "You must deliver my car by (when), otherwise you don't get a single cent". Put down in black and white. Then if AD does not deliver, can take up with CASE or whoever.

 

Of course it's not perfect. There are pros and cons to the system. But there are in any system.

[Joseph22]

Cat B was growing at 10% per year for the last 3 years.

Only to slow down in 2009-2010 when the growth rate is changed to 1.5%.

So, LTA missed their KPI very badly.

Target 3%. Actual 11.75% in 2008!

Obviously, this is not the case of missed target.

The growth is more politically motivated.

 

yes. i agree.

 

I dont know how many of you remember the NDP Rally by PM LHL. He mention that he had purposely allow the COE entitlement to increase so that more ppl to have to ability to buy cars.

 

Then now, because citizen are complaning that traffic is Jam. They come and flip prata that they miss judge the market.

Edited March 25, 2010 by Joseph22