After 4 months of suspending COE biddings due to the implementation of circuit breaker nationwide, the latest release of COE bidding results on 8 July 2020 have surprised stakeholders and analysts in the automotive industry due to an increase (albeit marginal) across all categories.
“As dealers already have agreements with car manufacturers beforehand, orders cannot be cancelled, and dealers will still have to sell these stocks regardless of demand,” explained Peng Hock, Founder of Guan Motor.
Over the past few months, it was predicted that COE prices would decrease due to low demand of cars caused by a post-pandemic economic slowdown. However, prices for COE have increased for all categories despite the bleak financial outlook. Why so?
STOCKING UP OF ORDERS
Throughout the circuit breaker, car dealerships across Singapore have collected orders over the past three months. Because individuals are unable to purchase new cars and renew their COEs, car dealers would need to collate orders and bid for multiple cars during this round of bidding.
INCREASE IN SALES AND OFFERS BY DEALERSHIPS
As physical showrooms were severely hit by circuit breaker measures, Authorised Dealers (ADs) and Parallel Importers (PIs) had to shift their marketing and sales strategies online. In order to generate more sales and clear remaining stocks, ADs and PIs have been actively pushing out promotions, deals, and sales for their vehicles. Some dealers have offered up to $15,000 off their vehicles, enticing consumers to purchase cars before the prices increase post-circuit breaker.
“Stocks are still coming in during circuit breaker, so in order to clear their stocks, spending on an additional $2000 to $3000 on COE is not an issue to them [dealers]… Showrooms opened on 18 June, so another two weeks of extra sales were generated. Buyers that made their purchase between January to April also demand to collect their cars as soon as possible, so it is likely that COE will rise in order to close deals quickly. All these data show that COE prices will rise,” explained Peng Hock.
CONCERNS ON HEALTH RISKS
Health risks are one of the largest concerns when travelling by public transport due to close contact with individuals on the buses and trains. Hence, commuters have opted to spend more on purchasing their own cars to reduce the risks posed by travelling via public transport.
PREDICTIONS ON COE PRICES
In light of the economic downturn faced globally, consumers and dealers may have anticipated a decline in overall demand for cars and therefore COE, thereby getting their hands on cars in hopes of getting their COE at a low price. However, it seems like with everyone thinking the same way, Keynesian economics seem to have failed to predict this increase in COE prices across all categories.
While most dealers in the industry anticipated a drop in COE prices, some individuals have anticipated this surge in prices.
Another industry stakeholder is Marcus Yap of Leco Prestige: “Surprisingly, we have seen strong demand [for cars] despite the extensive showroom closure. It will take awhile to clear the amount of backlog seen, and COE prices will head north if the COE quota is drastically cut as a result of low deregistration figures for the past 3 months.”
With COE prices seeing a steady demand despite significant economic downturns in Singapore, it is unlikely that we will see a drastic decrease in COE prices anytime soon.