Most premium
models to be taken out of Cat A
1. As announced today by the Minister for Transport, Mr Lui Tuck
Yew, the Land Transport Authority (LTA) has completed the public
consultation on possible refinements to the Certificate of
Entitlement (COE) system to better ensure some element of social
equity in car ownership.
2. After careful consideration, LTA will retain the existing
criterion for Category (Cat) A that the engine capacity of the car
should not exceed 1,600 cylinder capacity (cc), and add a new
criterion that the engine power of the car should not exceed 97
kilowatts (kW) (equivalent to about 130 brake horsepower (bhp)).
(Please
refer to Annex
A for more information on the proposed refinements to the
COE system.)
3. LTA will not implement a surcharge on multiple car ownership, in
view of concerns over its effectiveness and possible impact on
larger households.
Fundamental principles of the COE
framework are sound
4. The fundamental principles of the COE framework remain sound.
The public consultation exercise showed that Singaporeans too,
understand the need for car ownership controls, and that car
ownership is not in the same category as housing, health or
education, which are basic necessities. In fact, some commented
that the COE system is fundamentally sound and any changes should
not detract from its core purpose of managing the vehicle
population.
5. Nevertheless, over 80% of online survey respondents felt that
the current COE categorisation criteria should be changed to better
retain the original purpose of Cat A being for mass-market cars, in
view of the rising proportion of premium cars appearing in Cat A in
recent years.
New categorisation criteria for
Category A and B cars
6. A new set of categorisation criteria to better delineate mass
market from premium cars will be introduced. The new categorisation
will retain the existing Cat A criterion that the engine capacity
of the car should not exceed 1,600cc for Cat A, and add a new
criterion that the engine power of the car should not exceed 97kW
(equivalent to about 130 bhp). Had this additional engine power
criterion been applied to the 2012 vehicle registrations, almost
50% of cars in Cat A would have moved into Cat B. (Please
refer to Annex
B1 for the list of Cat A car models registered in 2012
that would have been moved to Cat B under the new criteria,
and Annex
B2 and Annex
B3 for the list of car models in Cat A and Cat B
respectively under the new criteria.)
7. LTA acknowledges that many who were consulted favoured cars to
be categorised based on their Open Market Value (OMV). However, it
is not practical to use the OMV of a car model for categorisation
as OMV can fluctuate quite significantly for different batches of
the same car, due to variations in exchange rates and car model
specifications. This means that the same car model can end up in
Cat A and Cat B at different times.
8. Engine capacity had been a good proxy for the value of a car
until recent years. The new twin criteria of engine capacity and
engine power will be an improvement as a proxy for the value of a
car, compared to the single criterion, while giving buyers
certainty over the COE category of the car model they are intending
to purchase. With the new criteria, more than 90% of the car models
in Cat A will have an OMV of less than $20,000, which was the OMV
threshold for Cat A/B most respondents preferred.
9. To keep pace with market trends and technological improvements,
LTA will review the criteria every few years and consider if
adjustments are necessary.
10. To give car buyers and the industry lead time to adjust, the
change will only be implemented for all cars registered using COEs
obtained from the February 2014 first open bidding exercise.
Mixed views on multiple car ownership
surcharge; impossible to implement effectively
11. Today, there are other measures outside the COE system that
address social equity in car ownership. For example, premium car
buyers pay significantly more than buyers of mass-market cars
through a tiered Additional Registration Fee and higher road
tax.
12. Although imposing a further levy such as a multiple car
ownership surcharge was a popular suggestion in the online survey,
subsequent focus group discussions found no agreement on how the
surcharge should be designed. Most agreed that such a surcharge
would be easy to circumvent and extremely difficult to enforce, and
could also unnecessarily penalise some groups (e.g. those in
multi-generation households). Some were also concerned about the
underlying principle of whether such a measure is fair, and the
signal that it sends against our meritocratic system.
13. LTA will therefore not implement a multiple car ownership
surcharge given the varied concerns and the difficulty of
implementing such a surcharge effectively.
Other suggestions
Pay-As-You-Bid (PAYB)
system
14. Another common suggestion was a PAYB1 auction
system, which is one we have periodically received over the years.
The argument is that it will result in more conservative bidding
and therefore lower COE premiums.
15. We have consulted experts in auction theory on this suggestion.
They explained that our current open bidding system does not
encourage aggressive bidding; in fact, it generally incentivises
people to bid the true amount that they are willing to pay. From
what we observe of the bids, very few bids are substantially above
the final COE price. This suggests that bidders monitor the prices
and are cautious about over-bidding.
16. According to experts in auction theory, an open PAYB system is
likely to lead to a similar outcome. Industry watchers also caution
that a PAYB system may not necessarily lead to lower COE prices
overall no matter how risk-averse buyers are, as prices are
ultimately driven by demand. (Please
refer to Annex
C for an explanation of the current and PAYB auction
systems.)
17. Thus, LTA will not implement a PAYB system.
Ban motor
dealers from COE bidding
18. Public feedback on calls to ban motor dealers from bidding for
COEs has been mixed. While there were many who proposed to ban
dealers from bidding, nearly half of the respondents to an earlier
LTA survey were against doing so3.
19. A number of people noted that the COE bid price is ultimately
dependent on buyers’ willingness-to-pay. Car buyers who supported
allowing dealers to bid for COEs also said that they preferred the
dealers to handle all the paperwork for registration, trading in,
financing and insurance. Others felt it would be impossible to
prevent people from getting their dealers to bid for them by proxy.
Banning dealers from bidding could also result in buyers having to
find separate financing for their COEs.
20. On balance, to preserve the option that buyers have today of
bidding on their own or having dealers bid for them, LTA will not
ban dealers from bidding for COEs.
Smoothening the supply of
COEs
21. There were also suggestions made about smoothening COE supply,
which are not new. LTA will continue to study if there is a
practical way of putting aside some of the upswing in supply
expected in the next few years, and to save them for the future
when the supply of COEs turns downwards again.
Continued investments in public
transport
22. Given Singapore’s scarce land resources, it is not possible for
everyone to own a car. The Government will continue to invest
heavily in improving the public transport experience, as public
transport is the more sustainable mode of travel, as well as
improve taxi services, to provide Singaporeans with a high degree
of mobility.
1 A PAYB system
is one where every successful bidder pays exactly what he or she
has bid, as opposed to everyone paying the bid of the highest
unsuccessful bidder plus $1, which is the current bidding
system.
3 Based on an LTA
survey in February 2013, about 43% of respondents were against
banning motor dealers from bidding for COEs.
LTA