[SINGAPORE] As the government looks at two possible ways to ease the COE supply crunch, some motor distributors are hoping it will go further and tweak the certificate of entitlement system itself, in particular, the Open Category COE.

The Open Category or Category E COE is transferrable, unlike Cat A for small cars (under 1,600 cc) and Cat B COEs for big cars (above 1,600 cc).

But with Cat B COEs in short supply, Cat E has recently been used by motor traders to register luxury cars.

As a result, the Cat E premium currently tracks the Cat B premium, and they stand at $92,010 and $91,000, respectively.

On the other hand, the premium for Cat A - for small cars or those under 1,600cc - is only at $64,201 now.

"Dealers of luxury models have bigger profit margins, so they are able to bid more for a COE," said the sales manager of a Japanese dealership. "As sellers of cheaper bread and butter models, we can't compete with them. So we have been priced out of the Cat E COE segment."

For a fairer system, George Lee, general manager of Opel distributor Auto Germany and Chevrolet dealer Alpine Motor, would like the government to consider splitting the Open Category so that some Open Cat COEs can be used only to register Cat A cars while the others are reserved specifically for Cat B models.

"Right now, the system is unfair to Cat A models because Cat B car sellers are monopolising Cat E with their stronger purchasing power," said Mr Lee. "This defeats the purpose of having an Open Category COE that can be used to register all vehicles."

Opel and Chevrolet have models in both Cat A and Cat B but the majority of the two marques' sales - about 80 per cent - are Cat A cars.

"Right now, if a customer walks in and wants to register a Cat A car immediately, it will not be possible unless he is willing to pay the price of a Cat B COE," said Mr Lee. "If the Open Cat COEs can be allocated in such a way that no one class of cars can monopolise them, it will be more equitable."

One senior executive of a dealership, who declined to be named because of company policy, agrees. "Yes, I think it will be better to apportion some Open Cat COEs for Cat A and some for Cat B, so that everyone has a chance to secure an Open Cat COE."

However, he added: "I think the best way forward is still to abolish Cat A and Cat B based on engine capacity and just go with a system determined solely on exhaust emissions."

Neil Fiorentinos, managing director of BMW Group Asia, said that the recent hike in the COE price resulted from a combination of strong vehicle demand and short-term price pressure, due to the quota limits experienced this year.

"This price hike happens across all categories, even for commercial trucks and lorries, not just passenger cars. At this moment, any short-term measures, including the separation of the Open Category for Cat A, Cat B, etc, to alleviate the price pressure sentiment, will likely be welcomed by the general public."

BMW is a luxury carmaker and the popularity of its models made it Singapore's top make last year.

But the general manager of a small mass-market dealership does not agree with the suggestion. "This is effectively saying that Cat E should be abolished. This is rubbish. With this small COE quota we have now, it will push COE prices even higher."

He said that Cat E now gets 25 per cent from the deregistrations of each respective category. Under the suggestion, if there are 100 Cat A COEs available for bidding, 25 pieces will be turned into a so-called Open Cat A COE, or a transferable Cat A COE.

The general manager asked: "Cat A, Cat B and Cat D (for motorcycles) were made non-transferrable to prevent speculation. If you allow speculation in Cat A COEs, plus reduce the supply of non-transferrable Cat A COEs, won't that raise premiums even further?"