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(Please remove the article if this is a repeat in the forum) Those who held high hopes of a meaningful change to the car ownership landscape, when the Government announced six months ago that it was looking to make the COE system fairer, have the right to be disappointed. After months of deliberation and public consultation, the only change introduced (with effect from February 2014) was a power cap for Category A. In addition to the existing engine displacement limit (up to 1600cc), cars in said category must not produce more than 130bhp. All other proposals, such as a surcharge to discourage multiple-car ownership (which would have resulted in a wider spread of “entitlement” among the population), were thrown into the waste bin. The Government says they are too hard to implement and enforce. In fact, this “too hard to do” reason is used to dismiss a proposal to ban motor traders from COE bidding. It is also used to explain why OMV (open market value) isn’t used to categorise COEs. Using engine power as a proxy to value is “simpler” and “easier”, according to the authorities. A proposal for a pay-as-you-bid system was also rejected. No move was made to address the feast-and-famine COE supply pattern, either. And despite a clear need to address an anomaly in the commercial vehicle category (heavy vehicle bidders outbidding light vehicle bidders and driving premiums to record level after record level), nothing was done. It is a sad day that “too hard to do” becomes a blanket excuse for not taking an issue by the horns. It is also downright tragic for a nation that had defied great odds to become what it is today, to succumb to a “can’t do” mentality when faced with a relatively straightforward issue such as COE. It is sadder still that the only change 
the Government decided to implement will not be as successful as it hopes it to be. Dealerships will bring in models that meet the power limit, including Mercedes- Benz, BMW and Volvo. Many will resort to diesel engines, which typically have low power ratings but high torque values. And as technology progresses, mass-market brands such as Toyota and
 Hyundai will roll out high-
powered models. Then what? What about the other
suggested changes? Well, most
 of them can be implemented. 
If, for instance, a surcharge
on subsequent cars is deemed 
the right policy to pursue, we
 should just pursue it – levy the
 surcharge by owner’s name, perhaps. There will, of course,
 be “leakage”, where buyers
 buy cars in their relatives’ or 
friends’ names. But not many people would be willing to be used in this manner – not without monetary incentive, anyway. 
And if people are caught by passing the surcharge this way, penalise them heavily. Register the car in a company’s name, you say? Well, just disallow that, and bring back the company registration plate, which used to attract higher levies. At the end of the day, the surcharge initiative is doable. All it takes is conviction. If it is the right thing to do, do it. If it isn’t the right policy, say so and explain why. Saying it is “too hard to do” smacks of defeatism. The same goes for the other proposals, such as banning motor traders from COE bidding. Yes, it is true that most car buyers have come to rely on car dealers for every little transaction. But if the law says they have to do their own bidding, they will learn to do so – just as they learnt how to apply for a HDB flat. Allowing motor traders
 to bid means allowing them to “game the system”. It is common practice for firms to lock-in buyers with attractive prices, and persuade them to “top up” when they continually fail to secure a COE. Sure, consumers can walk away after six unsuccessful bids. But by then, prices elsewhere would have risen, too. They face a lose-lose situation by walking away. Therefore, many will agree to “top up”. Big players have also been able to move the market, by the sheer number of bids they submit (or do not submit).
 A company can chase up premiums for five tenders, and then trigger a correction by withholding bids in the sixth. And because they have a pretty good idea how much premiums are likely to fall by, they set their COE rebate levels accordingly. More often than not, motor firms get to gain from a premium correction, and their customers only get a refund on the portion that is below the rebate level. Our Government also says that in a pay-as-you-bid format, consumers do not pay the quota premium they are willing to pay. The logic is hard to follow. In the first place, the premium that bidders are most willing to pay must be zero. But because they are conditioned to accept a certain premium over a certain period of time, they pay what the market wills them to pay. For instance, when COEs rose steadily from around $20,000 five years ago to $70,000 in recent months, the buying has not stopped. Not because consumers are as “willing” to pay $70,000 as $20,000, but because they have no choice. The notion of willingness to pay is an economic one. It does not always apply in real life – certainly not for something that is intrinsically worthless, such as a certificate of entitlement. But we know, it is hard to ban motor traders from bidding. Just as it is
 hard to tell the rich who have more than one car (who make up one in five car-owning households) that they will have to pay more. Indeed, the right things are always the hardest to do This article was written by Christopher Tan, consulting editor for Torque.

Judging from public reaction to the drastic twin measures announced in February to cool the car market, people arent happy. It is ironic, though, since at least one move which limits the motor loan quantum to 50 per cent (or 60 per cent if the cars OMV is $20,000 or less) and halves the maximum loan tenure from 10 years to five had been suggested by many consumers in the past several months. Their reasoning: it would cool overheated COE prices. This is history repeating itself. When the Government first introduced measures to curb car loans back in 1995, it was on the back of persistent calls by the public (COE prices had breached $100,000 just weeks earlier). But when the curbs were implemented, people were unhappy. History has also shown that loan restrictions can be overcome. Before the first set of loan curbs were lifted in 2003, financial institutions and car firms were already bypassing the restrictions, and attempts by the authorities to put a stop to schemes such as balloon payment and overtrade were largely unsuccessful. In any case, the government decided to deregulate the car loans market in 2003, only to reintroduce it two months ago (February) in a more severe form. This loan restriction accompanies a tiered ARF (Additional Registration Fee) scheme that places higher taxes on higher-end cars. While this measure will put some downward pressure on COE prices, it has a Robin Hood element it makes the rich pay more, and few folks will argue against that principle. But heres the thing. The tiered ARF scheme which levies a 100 per cent tax on the fi rst $20,000 of a cars OMV (open market value), 140 per cent on the next $30,000 band and 180 per cent on values above $50,000 works best when OMVs are correct. Many OMVs do not seem correct. In the 1990s and 2000s, the authorities moved swiftly to tackle tax cheats who underdeclared their OMVs. A string of motor traders were fi ned or jailed. Of late, however, those taken to task over OMVs have been relatively small players, mainly parallel importers. Does this mean the playing fi eld is largely even? It is doubtful. The OMVs of some new cars are inordinately low when compared to similar (or even inferior) rivals, while others have fallen inexplicably when a manufacturer assumes an importers role. A car with a lower OMV offers its seller a distinct advantage, simply because car taxes are based on OMVs. A model with a lower OMV allows the seller to price it more competitively than its rivals. It also offers the seller a fatter profit margin, allowing him more muscle to outbid others for the all-important COE (certificate of entitlement). Now, with the tiered ARF scheme, the advantage of a lower OMV is amplified. For instance, the OMV of a certain popular German luxury saloon is around $49,800, while that of its close competitor is $52,200. Under the tiered scheme, the former will incur $8,500 more in ARF, while the latter will incur $13,750 more. The difference between the pair is thus $5,250 under the new tiered scheme more than double the gap in the previous flat ARF regime. In absolute terms, this gap can get frighteningly wide as you rise up the automotive totem pole in Singapore. If the authorities do not act with speed and fervour, the wide gaps in ARF between cars might erode the social equity which the tiered ARF scheme aims to re-establish. As is, the tiered ARF scheme is already expected to be fairer when it comes to bidding for a COE. The additional cost that a premium model incurs in the way of ARF should help level the playing field for such a car and a budget model in the same COE category. In recent years, theres been hardly any contest between cars like the 1.6-litre Mercedes-Benz C180 and the 1.6-litre Toyota Corolla Altis, which explains why the German make, along with its arch-rival BMW, have been dominating the top spots on the local sales charts. What will level the playing field further would be a revamp of the COE categories to align them with the tiered ARF bands This article was written by Christopher Tan, consulting editor for Torque.

Among the many letters The Straits Times received in recent months from folks who called for changes to the COE (certificate of entitlement) system, a few stood out – their writers suggested that the Government allocate COEs according to bidders’ needs. These readers wrote that people with jobs that require lots of commuting, or those with young children or taking care of aged parents, should be given priority access to cars. The suggestion is easy to dismiss as it appears ridiculous, impossibly cumbersome to apply and administer, and runs smack against the purity of the current capitalistic system – where the price mechanism decides who gets a COE. The COE system, which turns 23 this year, has proven largely effective in controlling Singapore’s vehicle population growth, even if the targeted rate of growth has not quite been met consistently. It is a clean, cold and calculated system that lets economics run its course. Supply, demand, competitive auction, transparency – ingredients which ensure that those who are most willing and most able to pay will get a new car. Why muddy it with needs-based components? Well, it is interesting to note that the late Dr Goh Keng Swee, one of Singapore’s greatest policy-makers, mooted such an idea back in the early 1970s. In his book The Practice of Economic Growth (1977), a collection of speeches he made, Dr Goh touched on controlling Singapore’s vehicle population through a quota system. In it, he argued that such a quota system, where bidders compete for the right to own a car, could be the way forward (he spoke about it some 20 years before the COE system was implemented). But he also suggested that the Government set aside some permits for certain deserving professions, such as teachers and policemen. He also mentioned administrative officers in the civil service. Dr Goh did not articulate the rationale for this, but it is perhaps reasonable to assume that he felt certain people whose services are valuable to society, but who may not be able to compete with the wealthy for the right to own a car, should receive some form of dispensation. Of course, the professions he cited are much better-paying today, and most people in those jobs are quite capable of buying a car themselves. But the thinking behind Dr Goh’s suggestion was one grounded in some form of social equity. When the COE system was implemented in 1990, it featured a fairly strong element of social equity. There were many more car categories than today, so that bidders in lower income brackets are shielded somewhat from those who are better off. But the four car categories were merged into two in 2000. The move resulted in the demise of (cheaper) small cars. There was an outcry, but the authorities did not relent. Still, there was some fairness in the revised format, as big-car buyers do not compete with the rest for certificates. That lasted a few years. Today, COE Category A (for cars up to 1600cc) has been “infi ltrated” by luxury makes with 1.6-litre models. This has caused premiums in the category to spiral northward. Recently, they crossed the$90,000 mark to end not far from the Category B (cars above 1600cc) price. Despite repeated calls for a review of the system, nothing has been done to return some equity into it. It’s a shame, really, because there are various ways to modify the process so that bidders who aren’t that rich can have a fair shot at acquiring a new car. One way would be to revert to the four categories. Another would be to segregate vehicles according to their open market value (OMV) instead of engine displacement. For the latter, perhaps cars with OMVs of up to $25,000 can reside in Cat A, while the rest can go into Cat B. Whatever form the modification takes, the final objective of the COE system remains unaffected: it will still control the rate of vehicle population growth. The difference would nevertheless be tremendous to consumers at large. A review will also go to show that the Government is one that rules not only with its head, but also with its heart. And if we were to apply the late Dr Goh’s principle of rewarding certain groups of people by granting them easier access to a car, perhaps we could consider married couples with more than two children. That will certainly help to solve Singapore’s dismal birth rate. This article was written by Christopher Tan, consulting editor for Torque.