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| COE QUOTA |
| Tender Period | March, 2nd tender | April I, 1st tender | Difference (%'age) |
| Category A | 2,792 | 2,222 |
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| Category B | 1,267 | 1,084 |
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CONFOUNDING THE EXPECTATIONS of many in the motor trade, and certainly those of CarBuyer, the COE market failed to post a significant climb in this week's tender exercise, the first one of April and the first with a revised, reduced COE quota.
"Expect premiums to go up," we wrote last issue. Well, after wiping the egg off our faces, we must now report that the market traded flat. Category A COEs (for cars below 1.6-litres and taxis) ended bidding just $3 down to $11,901, while Category B certificates (for cars above 1.6-litres) closed at $13,402, posting a $154 fall.
So what happened?
We've said repeatedly that COE pricing is a straightforward game of demand and supply. Now, in this case, we knew that the supply of COEs was definitely about to fall, given the smaller quota for 2006 (see table).
All other factors remaining the same, then, the scarcity of COEs would surely cause a rise in prices.
Obviously, that didn't happen. What we failed to take into account was a significant drop-off in demand, which in this case was enough to offset the fall in the COE supply. The motor trade was quick enough to see it happen, though.
"We actually expected prices to fall this round," says the general manager of a distributor whose monthly sales number four figures. "The market is very weak."
Apparently, showroom traffic has been light. "The market is all about order backlogs now," says the GM. "No new buyers are coming in at all."
The reason no one is buying? Apparently, buyers have been savvy enough to get their new cars before the smaller COE quota kicked in. Another interesting thought is that, with rising property prices, ever-pragmatic Singaporeans have homed in on a better place to park cash.
"People who want cars have already bought them, and people who may have been thinking about it now go and buy property instead," laments our source. "We have customers asking why they should sink money into cars that depreciate the moment you drive out of the showroom when they can go and buy a new house which can appreciate in value."
Whether cars are really competing against real estate as an asset class, we're not certain. But as for the idea that car buyers were clever enough to make their move in the early part of the year, when prices were at historic lows, we've heard it more than once, from more than one motor trader.
"Customers now are all getting smarter, they're like a new breed," says the GM we spoke to. "They have a better feel for how the market will move, and they respond very quickly." We like to think, of course, that CarBuyer has played a part in that.
If we're such smarty pants, then, what do we think will happen in two weeks' time when bidding for COEs takes place again? Another round of little or no price changes seems probable, but we'd be willing to hazard a guess that a fall is coming.
That's based on how the industry has reacted to this round's results. Market leader Borneo Motors held prices steady for all Toyota models, which is hardly a stimulating move in terms of demand for COEs.
Prices from Hyundai, currently third in the market, have been reduced by $1,000 across the board, so management there must feel that COEs will ease.
As for the GM we queried the prognosis is the same, with lower prices expected. Beyond that, he didn't dare to guess what would happen. And, given how we got it wrong last issue, neither will we.
"Expect premiums to go up," we wrote last issue. Well, after wiping the egg off our faces, we must now report that the market traded flat. Category A COEs (for cars below 1.6-litres and taxis) ended bidding just $3 down to $11,901, while Category B certificates (for cars above 1.6-litres) closed at $13,402, posting a $154 fall.
So what happened?
We've said repeatedly that COE pricing is a straightforward game of demand and supply. Now, in this case, we knew that the supply of COEs was definitely about to fall, given the smaller quota for 2006 (see table).
All other factors remaining the same, then, the scarcity of COEs would surely cause a rise in prices.
Obviously, that didn't happen. What we failed to take into account was a significant drop-off in demand, which in this case was enough to offset the fall in the COE supply. The motor trade was quick enough to see it happen, though.
"We actually expected prices to fall this round," says the general manager of a distributor whose monthly sales number four figures. "The market is very weak."
Apparently, showroom traffic has been light. "The market is all about order backlogs now," says the GM. "No new buyers are coming in at all."
The reason no one is buying? Apparently, buyers have been savvy enough to get their new cars before the smaller COE quota kicked in. Another interesting thought is that, with rising property prices, ever-pragmatic Singaporeans have homed in on a better place to park cash.
"People who want cars have already bought them, and people who may have been thinking about it now go and buy property instead," laments our source. "We have customers asking why they should sink money into cars that depreciate the moment you drive out of the showroom when they can go and buy a new house which can appreciate in value."
Whether cars are really competing against real estate as an asset class, we're not certain. But as for the idea that car buyers were clever enough to make their move in the early part of the year, when prices were at historic lows, we've heard it more than once, from more than one motor trader.
"Customers now are all getting smarter, they're like a new breed," says the GM we spoke to. "They have a better feel for how the market will move, and they respond very quickly." We like to think, of course, that CarBuyer has played a part in that.
If we're such smarty pants, then, what do we think will happen in two weeks' time when bidding for COEs takes place again? Another round of little or no price changes seems probable, but we'd be willing to hazard a guess that a fall is coming.
That's based on how the industry has reacted to this round's results. Market leader Borneo Motors held prices steady for all Toyota models, which is hardly a stimulating move in terms of demand for COEs.
Prices from Hyundai, currently third in the market, have been reduced by $1,000 across the board, so management there must feel that COEs will ease.
As for the GM we queried the prognosis is the same, with lower prices expected. Beyond that, he didn't dare to guess what would happen. And, given how we got it wrong last issue, neither will we.
Category A: CARS (1600cc AND BELOW) AND TAXIS: $11,901
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Category A April 1st tender
52-week high: $18,279
52-week low: $8,009
Quota: 2,222
Bids: 3,183
THE COE QUOTA for this Cat shrank by 570 pieces but the premium hardly twitched, dropping by a negligible $3. The bid ratio for this round (the number of bids divided by the number of COEs available) fell to 1.43 from 1.56 last round.
This points to significant weakness in demand. The fact that premiums hardly moved, especially considering the dip in quota, means that new buyers aren't coming into the picture. Sources CarBuyer spoke to don't expect this to change in the immediate future.
52-week high: $18,279
52-week low: $8,009
Quota: 2,222
Bids: 3,183
THE COE QUOTA for this Cat shrank by 570 pieces but the premium hardly twitched, dropping by a negligible $3. The bid ratio for this round (the number of bids divided by the number of COEs available) fell to 1.43 from 1.56 last round.
This points to significant weakness in demand. The fact that premiums hardly moved, especially considering the dip in quota, means that new buyers aren't coming into the picture. Sources CarBuyer spoke to don't expect this to change in the immediate future.
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Category B: CARS (ABOVE 1600cc) ? $13,402
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Category B April 1st tender
52-week high: $17,701
52-week low: $9,001
Quota: 1,084
Bids: 1,420
CAT B PREMIUMS saw a $154 dip, which again, isn't much to write home about. However, the dip, as in the case of Cat A, comes on the heels of a significantly reduced quota. This coupled with the drop in bid ratio to 1.30 from 1.44 previously certainly points to very weak demand.
Hyundai distributor, Komoco Motors, dropped prices across the board by $1,000 after this round of bidding. Car companies only do this if they don't see customers packing showrooms and this indicates that Komoco expects lacklustre buyer interest to continue for the immediate future.
52-week high: $17,701
52-week low: $9,001
Quota: 1,084
Bids: 1,420
CAT B PREMIUMS saw a $154 dip, which again, isn't much to write home about. However, the dip, as in the case of Cat A, comes on the heels of a significantly reduced quota. This coupled with the drop in bid ratio to 1.30 from 1.44 previously certainly points to very weak demand.
Hyundai distributor, Komoco Motors, dropped prices across the board by $1,000 after this round of bidding. Car companies only do this if they don't see customers packing showrooms and this indicates that Komoco expects lacklustre buyer interest to continue for the immediate future.
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Category E: OPEN - $13,301
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Category E April 1st tender
52-week high: $18,802
52-week low: $9,275
Quota: 1,119
Bids: 1,657
CAT E PREMIUMS recorded the largest dip of $388. Last issue we reported that it was likely that Cat E COEs were being used more for securing Cat B car orders than for Cat A ones, given the significant gap between Cat A and E premiums.
The effects of order backlogs from cars like the Honda Civic and Lexus IS 250 that would have been propping up Cat B and E prices do seem to be petering out, however. That said, Nissan launches the new Sylphy today, which comes in Cat A and B engine sizes, and this could spark some increased interest.
52-week high: $18,802
52-week low: $9,275
Quota: 1,119
Bids: 1,657
CAT E PREMIUMS recorded the largest dip of $388. Last issue we reported that it was likely that Cat E COEs were being used more for securing Cat B car orders than for Cat A ones, given the significant gap between Cat A and E premiums.
The effects of order backlogs from cars like the Honda Civic and Lexus IS 250 that would have been propping up Cat B and E prices do seem to be petering out, however. That said, Nissan launches the new Sylphy today, which comes in Cat A and B engine sizes, and this could spark some increased interest.
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