COE prices can spike further if there is separate category for private-hire cars: Chee Hong Tat

There are trade-offs to having a separate Certificate of Entitlement (COE) category for private-hire cars (PHC), Acting Transport Minister Chee Hong Tat said in Parliament on Monday (Nov 6).

Such a plan, he said, can risk COE prices to spike further.

Premiums for COE, which form a big chunk of a car's final price tag, have been hitting new highs this year at various bidding exercises.

In the latest bidding exercise on Oct 18, the COE premium for Category B crossed the $150,000 mark for the first time. 

Premiums for Cat A closed at a record $106,000, up from S$104,000 in the last exercise.

In Parliament today, several Members of Parliament (MP) filed parliamentary questions on this issue.

MP Gan Thiam Poh (PAP-Ang Mo Kio) and Yip Hon Weng (PAP-Yio Chu Kang) suggested having a separate COE category for car-leasing companies that bid for vehicles that are then leased out as PHCs.

Car-leasing companies 'unlikely' factor for increase in COE prices

In response, Chee said that car leasing companies won about 21 per cent of certificates for Cat A in the last three quarters - a dip from 27 per cent last year.

Their proportion of Cat B winning bids also reduced slightly from 24 per cent in 2022 to 23 per cent in the last three quarters of this year. 

"The data shows that COE prices have gone up in a period where demand from car-leasing companies has come down, so it is unlikely that they are the main factor for the increase in COE prices," Chee said.

The minister shared that to create a new COE category for private-hire cars, their quota would have to be drawn from existing categories.

'A risk that COE prices may spike further'

But he added that it is difficult to ascertain what is the exact quote required to meet the needs of drivers and commuters, with the demand for PHC still evolving and could vary from quarter to quarter.

Chee said: "If we move too much of the existing quota from Cat A and B to this new category for PHC companies, it will further reduce the supply in these categories and there is a risk that COE prices may spike further.

"On the other hand, if we do not move enough quota to the new category, drivers will end up with insufficient vehicles to rent and commuters could be affected by shortages in point-to-point services."

Chee said that his ministry will study if there are further options beyond COE bidding to address the needs of car-leasing companies.

Not possible to predict COE prices: Chee

On Nov 4, LTA announced that the supply of COEs for cars and commercial vehicles will be given a boost over the next three months with the injection of an extra 1,614 certificates to the pool.

For vehicles under Cat A, 863 more COEs will be made available, an increase of 29.4 per cent. There will be an extra 546 COEs for cars under Cat B - an increase of about 11 per cent.

In Parliament today, Chee said that the ministry will do further "cut-and-fill", while maintaining the government's "zero-vehicle growth policy".

With such a move to increase in supply, Chee said that he hopes that COE prices would moderate.

"However, we know prices will also depend on market demand, and demand is not within the government's control," he added, while pointing out that it is not possible to predict how prices will move in the next few rounds of COE bidding.

chingshijie@asiaone.com