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COE Analysis August 1st Round: Phase 2, Part Two

Covid-19 have put us through a roller coaster of sorts over the last few months. Just as we thought Singapore was starting to have the pandemic under control, a couple of unexpected outbreaks have now put the recovery plans a few steps back.

No industry is unscathed from this pandemic, and the car trade is no exception. Following the reimposition of stricter measures to curb the spread of Covid-19 in late July, for the second time in less than three months, Certificate of Entitlement (COE) premiums tumbled in the first bidding exercise for August.

In Category A, for ‘mainstream’ cars with engines up to 1.6-litres in capacity and with less than 130hp, prices went down from S$47,010 to S$45,189, a drop of S$1,821 from the last bidding in July.

Category B, for ‘luxury’ cars with engines larger than 1.6-litres, or with more than 130hp, saw an even bigger fall, from S$59,501 to S$56,001, a drop of S$3,500.

The Open Category, which is used for registering any type of vehicle except motorcycles but is almost always a proxy for Category B, had a much less significant dip, falling from S$60,001 to S$59,599, a drop of just S$402.

COE Prices for Singapore – Feb to Aug 2021

The dip in prices are not entirely unexpected, and there is of course precedent, as we saw the same thing happen the last time the country went into the Phase 2 Heightened Alert stage back in May. In times of uncertainty, consumers tend to be more cautious, especially when it comes to big ticket purchases like cars.

A sales manager of a multi-brand dealership admitted that the past couple of weeks have been “difficult”, but then also pointed out that many other non-automotive businesses have suffered as well. And relatively speaking, the car trade is still doing rather okay, as there are now avenues for customers to buy cars without needing to be physically at showrooms.

And indeed, the figures do bear that out. The Land Transport Authority (LTA)’s half-term sales report reveals that several brands, including the likes of Toyota and BMW, are on track to surpass their 2020 sales figures this year.

While there are certainly spells of weak consumer demand, especially during the heightened alert periods, the overall big picture indicates that, on the whole, the car industry seems to be doing alright this year. Many dealerships have been pivoting towards online sales models in order to capture customers in a time when crowding around showrooms is not advisable, so the overall impact of the pandemic have been minimised somewhat, at least compared to last year.

There are definitely silver linings ahead for the industry. By the time of the next COE bidding exercise, Singapore should be exiting the current phase of tightened restrictions, and consumer sentiment should hopefully be on an upward trend. Brands like Kia and Honda are pushing forward with their local launches of their popular Cerato and Civic models this month, so that should help boost demand even further, and expect premiums to rise next time round.

Further down the line though, nobody can tell what the future holds, not least with Covid-19 being the unpredictable beast that it is. But generally speaking, the overall outlook would likely be more positive than negative, and the current dip should probably be seen as a temporary setback, rather than a sign of things to come.

This article was first published in Carbuyer.com.sg.

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