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.

"IF ONLY PEOPLE were more sensible," groaned the marketing manager of a large-make that very large-dealership. By "people", he meant "car dealers".

Speaking to CarBuyer before bidding closed for the latest round of Certificates Of Entitlement, he added, "If all of us got together to bid in a more controlled manner, COEs would be a lot more stable. We could all agree to bid a certain amount and you wouldn't get sudden jumps in the market. But no, there's always going to be one or two kamikazes who go in with crazy bids and spoil it all".

What he was referring to was the possibility that this round of COEs would spike up, and sure enough, they did. Or at least, Category A COEs did. The certificate for cars below 1.6-litres and taxis jumped by $2,275 to end bidding at $10,284.

The other certificates went in the other direction, with Category B (for cars above 1.6-litres) dropping $102 to close at $9,501 and Category E (for anything on wheels, but bought only by car buyers) shedding $526 to end bidding at $9,275.

Figuring out what happened is simple. In late January, the Cat A COE crashed to a historic low, and buyers responded immediately by flooding showrooms. One day after bidding (a Thursday), crowds could already be seen at a number of dealerships. Car dealers obviously had a field day collecting sales, and with plenty of orders in hand translating into heavy demand for the COE, Cat A's rebound should be no surprise.

As for Cat B, its failure to hit a new low in January probably caused buyers to focus all their attention on the Cat A segment of the market, allowing ongoing weakness in demand for new cars to keep its price falling.

What's interesting to note is that, though just about everyone in the motor trade anticipated a Cat A rebound, few expected a big one, say, to $11,000 or more. "At $11,000, a lot of people would be burned," said one source we queried. Translation: dealers would have lost money if COEs had zoomed that high, because they were collecting orders at such low prices in January.

What happens next is a little trickier to figure. This round of bidding concluded with 2,730 unsuccessful Cat A bidders. These 'leftover bids', as the trade calls them, will have to be added into the mix in subsequent rounds, adding upward pressure on prices. What?s more, Borneo Motors has raised prices for its Category A cars by as much as $4,500 since the bidding round before this one. Could this move be interpreted as a sign that the sales managers there expect Cat A to keep rising?

At the same time, major players like Honda and Nissan have upped their prices for Cat A cars by only $2,000 even though the COE went up by $2,275. The suggestion there is that they can afford to increase their prices by less than the increase in value of the COE because they expect the Cat A price to come back down in two weeks.

"The way the market works is very destabilising," says the marketing manager we spoke to. "There?s a big crash, and everyone slashes prices. Then buyers come in droves, and chase the prices back up. Then we increase our prices, and people stay away, and COEs come back down?"

For our part, our guess would be a small rise for Cat A, and for Cat B to more or less trade sideways. One important wildcard worth mentioning: Budget Day is on February 17th. If the Government should announce a market-stimulating measure, such as a tax cut, that could stir buyers into action and push prices up.

On the other hand, there might not be a tax cut at all. In which case, all the buyers waiting for one would no longer have a reason to put off their purchase, and their entry into the market could push prices up. Maybe there's something to Borneo's $4,500 price increase, after all?

Category A Feb 1st tender
52-week high: $20,654
52-week low: $8,009
Quota: 2,794
Bids: 5,517

LAST TIME AROUND, Cat A premiums sank to $8,009. That was the first time it had dipped below the $10,000, though, and now that it's back above, perhaps we should be thinking of it as a fluke result. In any case, we wrote that prices couldn't stay at that level, and they didn't.

In fact, demand has been so strong for the COE that this round's bid was over-subscribed by a factor of 1.97. With almost one in two buyers failing to get their COE and having to try again, it's difficult to see how this COE could do anything but rise again next round.

Category B Feb 1st tender
52-week high: $21,710
52-week low: $9,001
Quota: 1,265
Bids: 1,726

"DON'T EXPECT THINGS to change drastically for next round," we wrote last issue. Sure enough, the certificate for large cars ended bidding more or less sideways, with a mere $102 drop.

What's interesting is that relative demand for the COE was higher, with a bid ratio (the number of bids divided by the number of available COEs) growing from 1.16 to 1.36. This means dealers aren't charging enough for their large cars to make strong bids, but with so little buying activity for large cars at the moment, perhaps they're not able to.

Category E Feb 1st tender
52-week high: $21,999
52-week low: $9,275
Quota: 1,397
Bids: 1,785

WITH CAT E hitting yet another 52-week low, it's worth pointing out that this is the first time in a long while that an Open Cat COE costs less than either car certificate. Cat E certificates, which are transferable, are often used for 'immediate registration', a privilege that buyers pay extra for.

Perhaps with so much action in the Cat A end of the market, which is increasingly the domain of budget car buyers, immediate registration may be a luxury that fewer buyers are opting for these days. Cat E could soak up some of the extra demand from Cat A next time out, so an increase could be on the cards.