Govt hits the brakes on COE reductions

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#1
Motorists, traders get a break as remaining adjustments will now be spread over 3 years

By SAMUEL EE

(SINGAPORE) The COE quota for the next six months will be cut by an unexpectedly small 3 per cent, thanks to a government concession regarding the overprojection of COEs in earlier years.

The Land Transport Authority (LTA) announced yesterday that from February to July 2011, a total of 22,368 certificates of entitlement will be released, or 3 per cent less than the 23,063 for the quota period between August 2010 and January 2011. This means 3,728 COEs per month from next month compared with 3,844 currently.

The reduction is less severe than expected because of the government's decision to allow the remaining adjustments for the overprojections of vehicle deregistrations in 2008/2009 to be spread over three years instead of one year. If the correction for the 9,577 COEs was carried out over the next 12 months instead of 36, the impact to the upcoming quota would have been greater.

Transport Minister Raymond Lim said this was in response to a suggestion by the motor trade and that LTA is prepared to do so 'to give the industry and car buyers more time to adjust'.

'These are one-time corrections, and will not affect the long-term growth in the vehicle population,' Mr Lim said in Parliament yesterday.

So, starting next month, the number of available Category A COEs (for cars below 1,600 cc and taxis) will be 1,020 per month, down 14.6 per cent from the earlier six-month quota period. Cat B (for cars above 1,600 cc) will get 847 COEs, or 11.6 per cent less.

But Cat C (for goods vehicles) gets an increase of 34.7 per cent to 551 COEs per month, while Cat D (for motorcycles) shrinks 2 per cent to 651.

Cat E (the open category) also gets a 6.6 per cent boost to 659 COEs.

The method of determining the COE quota was changed in April 2010 and it is now determined largely by the actual number of vehicles deregistered in the preceding six-month period, rather than being based on forecasts of future deregistrations. Since then, the number of Cat A and Cat B cars deregistered has been on a general downtrend as COE premiums spiked up.

'Motor traders are not overjoyed by the new COE quota but we all heaved a sigh of relief,' exclaimed the sales manager of a mass-market brand which has been hit hard by the shrinking pool of COEs.

He said he was grateful that the transport minister had accepted the industry's suggestion to spread out the remaining adjustments to the overprojected COEs.

'My job is safe for now and you should still see me around for a few more years,' the sales manager added with a laugh.

Mr Lim also said pay-as-you-bid COEs are not the solution to high premiums. He was replying to Member of Parliament Lim Wee Kiak who had suggested such a system for COE tenders.

The minister told Dr Lim, who is the chairman of the Government Parliamentary Committee for Transport, that this had been studied 'in great detail some years back' and that there were certain shortcomings. In particular, the spread of prices showed a clustering around the lowest successful bid of 'about 20-30 per cent'.

'It's not as though the highest bidder is pulling up the price,' explained Mr Lim.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
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#2
alamak, u-turn...thought the govt is serious in controlling vehicles...
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#3
Prices probably rose too fast too furious.........

The reductions are still on, but spread out for 3 years......
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#4
I was thinking about how much revenue that govt actually collects from COE and whether the demand is elastic or inelastic resulting in more or less revenue derived when they cut supply. hmm...

I was still thinking of getting a car when COE collaspes together with the market.. Seems like prices for this piece of paper will sustain for a long long time..
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#5
(11-01-2011, 10:04 PM)barista Wrote: alamak, u-turn...thought the govt is serious in controlling vehicles...

Analyse deeper. They are trying to win political points for the elections. The budget debate is over by mid march.

Last year, papers already announced testing of GPS gantries.

After the election, u will be a lot more of such VIRTUAL revenue generating devices.

RE: Govt hits the brakes on COE reductions
alamak, u-turn...thought the govt is serious in controlling vehicles...
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#6
Agree with Contrarian, make the population happy for now by keeping car prices "affordable". After the elections, there is always time to make the COE price surge again with more measures to cut supply.

I believe most of the policies now would be election-friendly ones, with carrots being dangled and "issues" being raised. Let's wait and see....
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#7
Haha, this discussion reminds me of a PC game called 'Democracy', where u manage a political party in power and try to get re-elected after every term.

One demographic is 'the motorists', where u will erode their support if u raise petrol tax, build tolls, raise car tax(something like what is discussed here) etc. Thus, when the election date approaches, u can gain their votes if u pander to them hehe.

Pretty interesting and fun game. Anyone tried it too?
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