COE supply to be increased: No $100k COEs after all?

The Land Transport Authority (LTA) has announced that the supply of Certificates of Entitlement (COEs) will be increased by 14.3 percent for the period of May to July 2022, with the increase spread out across Categories A and E primarily. The move could help to ease pressure on soaring COE premiums, which have been steadily rising in recent months.

In the last COE bidding exercise in April, premiums for Category E, which is open to all vehicles except motorcycles, ended at $99,999, just a dollar short of the landmark $100,000 milestone, a figure not seen since the 1990s.

However, Cat E will see a 5.3 percent increase in COEs available for the period of May to July 2022, with an average monthly quota of 379 COEs, up from 360 COEs in the current period. This could help bring premiums down, and reduce the possibility of prices breaking past the $100,000 barrier.

Category B, for cars with engines that make more than 130hp, or are above 1.6-litres in capacity, will see a reduction in supply for the upcoming period. The quota for Cat B will shrink by 4.2 percent, from 1,099 COEs monthly currently to 1,052 COEs.

Cat A, which is currently for cars with engines less than 1.6-litres in capacity and output of less than 130hp, will see their supply of COEs increase by 15.3 percent, from 1,062 a month currently to 1,224 COEs for the upcoming period.

While theoretically this would mean a probable rise in Cat B premiums, and a dip in Cat A prices, things are complicated a little by the impending regulation change which will see electric vehicles (EVs) that produce more than 110kW/147hp being moved to Cat A starting from May.

The net result could be an effect where any additional demand for Cat A COEs is offset by the increased quota, and vice versa in Cat B.

The increase in COE supply, notably in Cat A, can be attributed to a large number of cars whose COEs were renewed for a five year period and have subsequently expired.

These cars can no longer have their COEs further extended, and their COEs are thus subsequently recirculated back into the quota. According to The Straits Times, there were 19,261 cars of age between 14 to 15 years old at the end of 2021, and a significant number of these are expected to be deregistered this year, which will further add to the supply of COEs for the year ahead.

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This article was first published in CarBuyer.