Last issue, CarBuyer predicted that Cat A prices would slide again for this year's first round of bidding, and slide they did, by a hefty $1,479 to close at a new record low. It's therefore becoming increasingly certain that Cat A prices to date have been propped up by the buying frenzy triggered by last October's release of extra COEs into the system.

Last round, the number of bidders who failed to clinch their COEs was 451, this round, it was just 289, which strongly points to lacklustre buyer interest. The fact that the smaller number of Cat A COEs available this round was matched by a smaller number of bidders seems to confirm this.

While no one expects the market to be able to comfortably replace the frenzy buyers (once these buyers get their cars and are consequently flushed out of the quota system), what is worrying is the fact that there don't seem to be many new buyers around at all.

With the 2006 Budget announcement looming, and the rumour mill starting to get into its stride, more and more potential buyers could well be holding out for Additional Registration Fee cuts, a significant albatross currently around many a car salesman's neck.

That and the fact that over half of the cars on our roads are three years old or newer make for major disincentives for new car purchases. The latter fact is a big problem, as in a market flush with practically brand new cars, compelling reasons to buy can only come with seriously cutthroat prices, a nightmare situation for the majority of dealers.

If we go back a bit, we can find further nails in the proverbial coffin. When car financing was liberalised earlier in 2003, a big host of buyers who would have had trouble with the old 30 percent downpayment and seven-year loan term schemes all went out and bought themselves brand new cars. Cars that they're now stuck with, so that's one big chunk of the market locked out of new vehicle sales.

All these factors, the rapidly dawning realisation that we're dealing with a saturated market in particular, don't bode well for the industry this year. What could give things a boost? Hot new cars, previously a sure-fire way to ignite sales charts, don't seem to be able to have the same effect. According to some industry observers, no less than a major paradigm shift is going to change things.

"I'd like to see a total normalising of the diesel tax for private cars," says one marketing manager. "People respond to savings, and if you make diesel (ownership) genuinely worth it, then I think there's big market potential," she continues.

The diesel tax has recently been revised (see story on page 8), but such a change as the manager suggests will not happen overnight. This does show, though, just how inert the local market is for such a drastic measure to be considered.

With regards to the other Category premiums, Cat B prices did rally to close $2,602 higher than last round. The terrifically low $9,001 Cat B premium last round saw dealers revising prices to suit, and apparently many buyers did take the bait.

However, according to one manager we spoke to, this isn't indicative of generally healthy activity. The manager intimated that after Cat B premiums dropped by $4,000 from approximately $13,000 to $9,000, most dealers only revised prices downwards by an average of $2,000, indicating that they expected a return to the $11,000 range.

The fact that such a drastic drop only spurred prices to recover only relatively strongly, especially considering the fact that just over a month ago, Cat B prices were over $14,000, points to a weak market in general. "Bookings are just not strong," laments the manager we spoke to.

Cat E premiums, which generally keeps pace with those of Cat A, dipped to a new record low. Normally, Cat E COEs are used for immediate registration, but prices in general seem to be low enough for the majority of buyers, even the very impatient ones, to forego the premium for getting their cars right away in favour of the potential savings from betting on a cheap COE.

The next round doesn't look rosy, from the trade's point of view at least. Now bereft of support from the frenzy buyers, Cat A (and also Cat E) prices don't look to change much.

That said, with buyers no longer distracted by the holidays, there could be enough interest to spur a small rise. As for big cars, there was noticeable buyer activity following last round's low Cat B premiums and this should most likely tide Cat B prices over for at least the next round of bidding.

Cat A premiums dipped by over $1,400, making this round's result the lowest in 52 weeks. The quota for this round of bidding dipped by 71 pieces but there were 233 fewer bids. The slump in Cat A premiums could have been due to a sit and wait attitude amongst buyers who were encouraged by last round's big drop in Cat B premiums.

One manager CarBuyer spoke to, complained that buyers tend to lump COE Cats together, and news of a big drop in one Cat tends to have an unfortunate halo effect.

One sales manager we spoke to reported significant showroom activity last weekend, spurred by last round's record-low Cat B result. Some pundits were predicting a drop to $5,000 for this round of bidding but obviously this wasn't the case. CarBuyer, along with the managers we consulted, predicted that Cat B could not hold at $9,000, and it's since risen back to what seems to firmly be the new $11,000 - $12,000 comfort zone.

The number of COEs this round actually went up slightly by six pieces, but the number of bids jumped by 490. This round saw nearly 600 people missing out on their COEs, so this could help to keep Cat B stable for the next round of bidding.

Cat E suffered another significant fall, this time to a new 52-week low. Cat E premiums tend to move in tandem with those of Cat A so the result was no surprise. Some Cat E COEs are used to secure Cat B cars, too, and with the recent hammering that Cat B's taken, customers might have been persuaded to try for a Cat B COE instead of forking out extra for Cat E and immediate registration.

With no real buzz from the Cat A segment, the next round could also be fairly quiet for this Cat. On the other hand, with Cat A prices at such attractive levels, there could be enough buyer interest to spur a corresponding resurgence in Cat E premiums.