With COE prices heading downwards, we take a look and crunch the numbers to find out how would this affect your car purchase.
1) Back to normal?
In early February 2016, during the first round of COE bidding for the month, the price for Category B COEs (cars with engines bigger than 1600cc or producing more than 130bhp) dropped to $38,610, the lowest in nearly five years. It sparked discussion that prices of COEs could soon settle to more ‘normal’ levels over the coming months.
Of course, what constitutes ‘normal’ is quite subjective. Thus far, the COE system has been one with peaks and troughs, with prices rising and falling greatly over a decade-long cycle. Unless we have a sustained period of consistent COE prices, it’s very hard to dictate what is a ‘normal’ COE price.
That said, to most people, ‘normal’ could just possibly mean ‘affordable’, but again this varies according to individuals. But it’s not unfeasible to put the benchmark at around the $30,000 mark, given the reaction to the recent COE price drop. Also, with the expected increase in quotas set to enter the system, we may see COE prices reach that state of normalcy in 2016.
2) The Germans’ time at the top may be over
There’s always been a very clear trend when it comes to car buying in Singapore. During good and prosperous times, the best-selling cars tend to be premium luxury brands, such as Mercedes-Benz and BMW. It’s fairly obvious why, but this is the main underlying reason – if you’re going to spend hundreds of thousands of their dollars on a car (as they’ll have to do with high COE premiums), you might as well go for something better.
Therefore, the opposite is true as well. When the economy slows, people tighten their belts and COE prices dip, they tend to go for more budget and mainstream options. The Japanese brands have always been strong during these times, but during the last major financial crisis in 2008 – 2009, the Koreans (Hyundai and Kia) ended up as best-sellers here in Singapore.
The forecast for near future is more of the latter, with a bleak economic outlook ahead, in tandem with a predicted fall in COE prices, which could see the Asians fight their way back to the top of the sales chart. Indeed, this trend is already in the process of panning out. In figures obtained from the Land Transport Authority, Toyota and Honda have already sold 1,480 and 1,448 cars thus far this year. In contrast, Mercedes-Benz sold 760 cars, while BMW is lagging way behind on 281.
3) More choices for drivers
While it looks like the Japanese could very well be back on top, it is still too early to conclude, and to be honest, it really could swing either way, depending on how much COE premiums fall, and in which categories.
A key factor to consider is the blurring line between premium and mainstream cars. Nearly all the Germans now have cars in the smaller Cat A segment, appealing to buyers seeking entry into premium brand ownership at relatively affordable prices. Effectively, these cars are muscling into the traditional territory of the Asian brands, and giving consumers plenty to think about when they go car shopping.
Additionally, as witnessed by the recent COE results, there remains the possibility of Cat B being even lower than Cat A, potentially playing into these brand’s hands even further. It’ll be interesting to see what happens over the next few months.
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