[SINGAPORE] With vehicle deregistrations staying flat in May, some motor distributors expect small-car COE premiums to cross the $80,000 level later this year, while big car premiums could hit the six-figure mark.
With the premium for Cat A (cars under 1,600 cc) at $59,003 currently and Cat B (cars above 1,600 cc) at $83,000, these estimates mean some in the industry expect the COEs to rise by about $20,000 between now and the year-end.
The reason for the pessimism is that low deregistration rates result in a lower number of replacement COEs or certificates of entitlement required to register a new car.
Figures released by the Land Transport Authority yesterday showed the scrap rate for Cat A cars rose to 591 units in May, from 578 in April.
While last month's figure may be an increase, it contrasts with the 1,427 vehicles deregistered in the same month a year ago, or a 59 per cent year-on-year drop.
As for Cat B, the scrap rate in May was 593 units, down from April's 665.
The vehicles scrapped between January and June 2012 will be one of the three components that determine the next six-monthly quota from August 2012 to January 2013. The other two components are the annual vehicle growth rate of one per cent, and the adjustments to the previous oversupply of COEs in 2008/2009, which have been deferred for a year.
If this month's deregistration rate stays roughly the same as the first five months of 2012, then the new quota should have about 40 per cent fewer Cat A COEs and a largely unchanged number of Cat B COEs.
When that happens, the sales manager for a mass market make said he expects the Cat A premium to "quickly shoot up" by $10,000 to about $70,000.
It may rise by another $10,000 to around $80,000, "depending on when the new luxury Cat A models come onstream and how aggressively their distributors will be in securing COEs for them". In the second half of 2012, Mercedes-Benz, BMW and Audi are expected to introduce new models with 1,600 cc turbocharged engines.
"(To hit) $80,000 for a Cat A COE is very possible because the smaller quota is being shared with taxis and more and more premium brands with small engines," said the sales manager.
Some people have argued, however, that as the Cat A premium rises, the buyers of bread-and-butter models may sit it out on the sidelines, thus reducing demand and preventing this small-car category from overheating.
But the sales manager pooh-poohed that idea.
"With luxury and Continental makes introducing smaller engines, the choice is greater and it increases the pool of potential buyers tremendously," he said. "So even if some buyers drop out of the market, they will be replaced by new ones."
As for Cat B, he said the quota is already so small that unless the economy takes a turn for the worse, there is no way to go but up.
"Hopefully, the Cat B premium will hover around $90,000 in the next six months," said the sales manager. "But let's just say I won't be surprised if it touches $100,000."