Deep DiveUp to 20,000 additional certificates of entitlement (COEs) will be progressively injected across all vehicle categories from February 2025. Why is the government making this move and will this bring COE premiums down? Steven Chia and Crispina Robert speak to Walter Theseira from the Singapore University of Social Sciences and Arthur Wong, managing director of ACM Automobiles.
You're listening to AC N A podcast.
Hey, everyone. Welcome back to another episode of Deep Dive with Chris Peter and myself, Steven. And today we've got an issue that I think keeps a lot of people on their toes. Yes. Let's get right to it. It's the announcement by LT A that up to 20,000 additional coes will be injected across five categories over the next few years starting from February 2025. So this got everyone excited,
including me. Oh, really? You're thinking of getting a million dollar question. Will this mean that ce prices will come down? We all want to know. No, but I want to ask you something before we start. Do you remember your first car? My first car, I've only had one car here in Singapore. That old car. Ok. Do you remember how much you paid for it? The last ce I paid $33,000. Ok.
Which seem expensive then. But on hindsight now, it seems like a good deal, right? It's crazy. Ok. So mine was a little Nissan March. We paid about $55,000. I was seven years left on it. This was about 25 years ago. Ok. 25 years ago. Yeah. Yeah. So when I went back to the category for this car
and I looked at it if it were brand new, $102,900 just for the coe. So I was thinking, I'm quite glad I'm old now. Why? Because 25 years ago is a long time. Right. Yeah. So, are you glad you had a car or you should have kept it renewed? The coe maybe. No, we did eventually. But
I'm just feeling that the price difference is so huge, right? I guess it was the wrong fit because the Nissan March, it just wouldn't march to your right. No, no, no, but ok, but a lot has changed. Obviously, the whole transport infrastructure has changed, the population has increased. But owning a car is definitely not cheap and to be fair, the public transport system is very effective. They've tried to make it such that we don't really need a car. But of course, many of us still desire to have one.
We're going to get cracking and talk more about that. We have two great guests with us today. There's everyone's favorite transport economist Walter Tira from Singapore, University of Social Sciences. Hey, great to be here. And Arthur Wong, managing director of AC M Automobiles. Hi, it's good to be here too. Let me start with this fresh injection of 20,000. Now, the wording seems quite wide.
It says up to 20 K, no details on which categories over the next few years. Water, why is that? Why is it so wide?
I'm going to take a step back and look at what's the purpose of this 20,000 injection? What policy problem is it solving the problem that LTA have been dealing with over the last couple of years is that we are at a low point in the supply. But the reason why we're in a low point of fee we supply. If it, basically, when a fee is issued, it's attached to a car and
people tend to keep their cars for the entirety of the 10 year, the period. So what this means is if you have a given year where pretty low number of C gets issued, the same low number gets perpetuated 10 years down the road and so on and so forth. So what happens in Singapore is towards the end of the decade, you have a much larger than average number of series issued in the early part of the decade, you have a very low number of series issue. That's the problem that LTA has been dealing with for the last couple of years. We are in the low part of it.
And the problem is there are no good solutions to breaking out of this cycle. So the solution they've already tried in the last couple of months has been this idea of cut and fill. They take coe quota belonging to cars which are guaranteed to get scrapped over the next few years because they are on the five year non renewable standard scheme. And so they've been taking those coe and bringing it forward, but evidently they must have concluded this isn't aggressive enough. And so I think that's where part of the idea behind this additional 20
1000 comes in. It is a pool of core which could be used to, in my view, perhaps move faster in terms of the filling, right? Because cut and fill is very limited, but you can move a bit faster of this fill more in 2025 2026 when you actually need more of the impact to be and balance out the supply over the years. So that's one the other thing to consider is can we actually have a larger number of vehicles in Singapore? Can we manage that? And historic,
that would have been a very dangerous thing to do because we didn't have the tools to manage surges of congestion very well. We had the ERP system but it was very inflexible, right? You only have those gantries in the town area, some of the expressways, but with ERP two, which is now being rolled out to all of the vehicles we will have when it's implemented fully a much more flexible means of dealing with congestion, hot spots. And I think that gives the planner some confidence that if you can expand the overall number of vehicles, you will not destroy
movement of cars and so on in Singapore.
Ok. So Walter, I'm going to be your b average student. Ok. And I'm gonna ask you this question. LTA has also said that there will be no change to Singapore's zero vehicle growth rate for cars and vehicles until 31st, January 2028. And can you explain the no change versus the increase to 2%? Both of it sounds a little bit confusing to me.
I would say in practical terms, they are obviously increasing the number of vehicles that will be on the road in,
but they are not increasing it by means of the vehicle growth rate formula. So what's the difference? The difference is that the way that LTA has been using the vehicle growth rate formula is that it basically adds a mechanically determined number of vehicles to the theory quota available each period. So for example, if you decided, I want to have, let's say a quarter percentage point growth for passenger cars, what would happen is over the next couple of years, the period of time for which that growth rate is determined,
you would just mechanically add that quarter percent every quarter to the fee. We supply the problem with that, especially over the next couple of years is that it would end up not adding enough over the next year or two, but it would end up ending in my view too much towards the end of the decade because towards the end of the decade, that's when we have a very large c supply projected to come on due to most of the vehicles in Singapore
getting around the 10 year mark during that time. So the VR is a very blunt tool, but with this 20,000 LTA has the flexibility to put it in when they want. And I think the objective will be to smooth out the sea. We supply a bit better.
So overall, we are going to see an increase in the number of cars being allowed on the
road. So
that's the projection because this 20,000 from what we have heard so far is not being taken
from supply in the future period. It's going to increase the
overall number
20,000 on top of whatever else has been calculated. OK? So in Singapore, cars are deregistered, right? And then you free up that amount that could be 10,000 whatever. And then there's people who give up their cars, but there's population growth too. There are people who want to drive. So Arthur maybe you can come in. Do you see demand for cars still being high? You've been in the business for 11 years now,
I always feel like there's pent up demand the minute something goes down co e especially I feel like the showrooms will be packed. Yes, you are correct. Who's interested in buying cars now probably most of Singaporeans dreams to own a car. Maybe less the younger generation. The public transport is pretty good already so they don't need a car. But I believe people after their thirties or late twenties, they might want to own a car one day and those that are in the market because right now there's so much things like
social media and SG car is so easy for you to, to browse through during your free time. They also adds to your desire to want to own a car because in the past like probably 25 years ago when you own a Nissan Mar, you probably flip through straights times classified and you look through boxes. That's true. Yeah. And you, and there are no pictures, nothing to make, you have the desire. You can't look at like 20 pictures of the same car, different angles and all,
all the people are hiring pro photographers to take photos of the cars putting on car. So all these things will also add up to people wanting to own a car. So there's always been demand because when you first get married, you got to get the home first. But once you've kind of paying for the home, then you figure, ok, how can I get a bit more comfortable and I have Children now? So different needs require different resources. Exactly. I mean, I got the car only because we had kids. Right.
So it just seemed a lot easier to do that. But here's the thing, Walter, we wanted to ask you as well. The last time there was an increase in COES was between 97 and 2003, 10,500 Coes were introduced when the current, er P system was installed. There's a link to the, er P system but we don't quite understand. So, so far, LT A has said
that don't worry, even with more cars, the ERP 2.0 can regulate traffic. Now, I drive only on days when we record from my home in Yishun to one north and it's a nightmare there. At least three choke points. How would more cars be better with, er, P 2.0. So what's the connection between lots of cars,
traffic congestion and the ERP 2.0 which is supposed to be
better to be clear.
Owning a car doesn't necessarily create a social issue or a problem. I mean, you can talk about the environment and so on, but as far as getting in other people's way on the road, it's not ownership that matters. It is using your car and in particular, it's choosing to drive your car to the same place at the same time with other people, then you have a problem and when you look at a very dense city, like
what are your options? Right, your options are, you can regulate the number of cars. We already do that. You can build more roads, but the more roads you build, the less livability there is for everybody, especially people who don't drive or you can figure out some way of regulating when people actually use the cars. And that is where ERP comes in. I mean, it's not just ERP, if you go all the way back, we started doing this, you know, way back with the area life scheme. The,
the idea is you can have more people in Singapore owning cars if you have a better way of managing how and when they actually use their cars and that is where, er, P two comes in
just
to break it down a little bit more with the P 2.0. It might tell me even before I set off, hey, look, there's a huge congestion here. If you drive past this, you're gonna pay like $5. So that might encourage the whole toll system is meant to sort of influence you
to change your behavior so that you don't drive during peak period, you drive at a different time, you go to work an hour later,
possible.
It is possible, but it's only possible if you have some margin of drivers who are willing to change because not everybody can change. Right. If you have some high value business meeting in town, you're not going to change. But it's about getting those incremental drivers who could switch maybe the breakfast meeting or something to a lunch meeting. Instead those guys changing and
then you get a reduction in traffic loading
as a road user. If I have to go home from CT, from, let's say town back to Ang Mo Kio, I'll be hit by a three or $4 Gentry. So I will tell myself I'll probably go somewhere and relax, have coffee and probably go back later or maybe find something to do in town or what not. So this also helps the behavior. But if I say you're in a hurry. Yeah, of course, you have to go back. I guess the whole idea is to nudge our behaviors. Right. Yeah, I mean, same thing when
my kids say come and pick me at 630. I'm like, that's the worst time. I'll spend more time sitting on the road than getting them back. So I said you just go and stay on for another hour and then I'll come get you later. You know, it's always strikes me, especially on CTE, during peak hours is the highest, right? Something like 67 $8 or whatever. I'm not sure. Now in the morning, in the morning, 7 $78. Right. But it's so crowded. So maybe when it gets to $10 it won't be so crowded.
But the point is, it's just meant to be a better system. Is that what I
say?
So, you know, thinking about the CTA example, yes, it's right now, you know, it costs quite a lot to go into the T in the morning. But when you look at the average travel speed on the CT, it's still maintained within the target band that LT have for, you know, kind of maximizing throughput. And
I don't think you would actually be getting that kind of speed on the CT during rush hour. If we had zero pricing at all on it, you would have something much closer to KL or something like that where? Yeah, I mean, you can go on your way during rush hour. There's no extra toll beyond what they usually charge, but it's so painful, right? So, so it's a bit of a
difference.
Let's get to prices. Do you guys think that once the LTA releases these extra co e
it will have an impact on prices. Everyone's demur on that, but they're not releasing it all at once. We don't know which
category.
If you look at what Lt's objective is in this, the objective is not to target a certain price level, their objective. If they try to stabilize the ce supply, to try to undo some of this boom and bust cycle we have because that is not very good for the economy to have this extreme swing and the price and the E supply. It's because with all these swings in price
thing, you induce a lot of behavior from car buyers, businesses and so on to try to time the market to try to second guess what's going to happen. And, you know, I don't think that makes a lot of sense. So their objective is to stabilize supply. But if they wanted to do that, my opinion would be, it would be more sensible for them to target the earlier part of 2025 2026 to inject most of the supply because that is when stabilization makes a big difference. But end of the decade, you have very large supply coming in. You would be actually
making this boomba cycle worse if you added it end of the decade. So my projection is earlier rather,
in other words, putting it in the years when there is far
less supply supply.
Exactly. Yeah. And
then
for the split between categories, my bet would be distributed similarly to the current mix of vehicles in Singapore, which means that a lot of it would be category a, you know, passenger cars.
Actually, when you say stabilize, is there any indication of what kind of pricing would be considered stable? Because iron
the 100,000 mark is something people have kind of almost gotten used to in a strange way. And one could say that's kind of stable in a crazy way. I thought, what do you think? Would it bring down prices as a car enthusiast? I hope it will come down. But it is anybody's guess even, I mean, in this business for 11 years, I have no idea how this thing works. Yes, I hope it comes down. We are always guessing among our people in a trade that next week will go up. I know nobody buying cars should come down and it goes up.
Then there was this period all of a sudden it dropped down to 85,000. So all of a sudden, how did that happen? And you went up again? And then I asked everybody, do you suddenly like bit lesser or what? Not? Everybody did the same thing. We just did. The drill. Is anybody no way to really predict it. What would be considered in this day and age now? Fair price where people will say, ok. Yeah, that makes sense. We had a good run during the 2018 and 2019 period. All the way up to 20206. No, 30,000. Those were the best days. But it's bad because everybody
tends to renew their cars. It 30,000, it makes sense to renew. Right. So, there's no new coe going back to the market. So, yeah, right now it's 100,000 or the less flashy, less exotic marks, they will say, ah, I just, I just get a new car whereas those who are like sports cars they will renew. This is a trend that we are seeing right now. Lesser of the more bread and butter cars renewing their coe.
I
will say that on a week to week basis, you can't really predict theory prices. But on a long term basis, when you look at the theory cycle,
it's very consistent that you have lower prices when you've got better than average supply, that means end of the decade and you have much higher than average prices when you are going through very low supply, like right now in last couple of years. So that is the long term cycle. And actually that is why it is important for the policy maker LTA to try to even out the cycle because this fluctuation isn't great for
business.
So in a sense, we're only in this shortage of supply for these few years, it is a transition according to what you're saying, right?
So why not just put in numbers each year to top it up a little bit and then kind of see how it goes
in part the whole 20,000 injection. That's kind of the idea, right? It is to stabilize the low supply years and hopefully not to add fuel to the fire in years where you got a lot of extra supply. What's really going to be interesting is what will happen next decade because in the next decade, we will go back down to a low
supply situation again, again, just based on the low number of new cars that were registered over the last couple of years. And I think that's when we have to see whether LTA is willing to experiment with much more aggressive shoring up the supply and maybe utilizing ERP two and so on to allow that to happen.
So Walter, then I got to ask you actually, when you talk about the end of the decade, what year are we talking about for higher supply,
you mean? Yeah,
which is the year. Now, when you're saying we'll have a larger supply
probably like 2027 2829 around that period. Basically, it just ramped up gradually. It's not rocket science to do the prediction. All you have to do is look at the LTA data and how many new cars were issued 10 years ago. And most people hang on to it for over 10 years. So that's how you
predicted. That's the period of time where they sell a lot of new cars as well. 07 to nine were the golden days as well. It was low co E
so things were moving then after that, you reach 2010, it spiked up to 137,000 and it came down. I'm kind of glad to hear that because my coe 2029, I'll be in the sweet spot, so to speak. So it's just a matter of timing, it looks like right. I demand and supply, isn't it? Exactly? Ok. So another thing that I thought that we could clarify
was the role of the private hire vehicles in the CO E space. Now, the government has said that they are unlikely to be driving up the prices because of a lower share of CO es but others say that these guys have a role to play in the prices. Now, Minister Chi Hong Ta has floated the possibility of a separate category just for them. Do you think that will make a difference to prices? I think that will make a difference. Definitely, I don't have the exact numbers of how many people are bidding for private hire,
but it's adding into what the normal consumers in the same category.
So I think if there's a separate category, probably it can create a
better environment.
I think a lot of the unhappiness about private hire vehicles eating in the c that's going to be worse when you have very low c supply like last couple of years. And of course, we all know that because they're running a business and because they intend to utilize the heck out of the car as long as they bet they can make it back in rentals, they'll be willing to bid for it unlike ordinary consumers like us. But this problem will also go away when they hire
supply because it's not as if the number of vehicles that you want in your fleet and so on to a private hire goes up magically in years where there's larger sue supply, right? I think it's going to be more or less fixed depending on when you want to renew your fleet. So I predict much less public concern about it in years with higher coe numbers available. And I think this pressure for a separate category might also go away. I would also add that there is one complication. I think with having a special category for PH
and that is that today, we allow pvs to be converted from private cars and vice versa, pretty much at will, right. If you wanted to have a special category, you would actually have to stop this kind of conversion. So that would be the additional complication
is only a taxi
because a lot of people, as we know, they use their private hire car for their own because some of them are doing part time. Right. It's the same as buying a car. You're paying installment. I met up with a driver, say, who are you driving?
No, I need a car. So I rent like 70 bucks a day. I fetch my kids to school. Then when I have free time, I just pick up some customers to make back the money. So that's how they are seeing this as a way to own a car as well, but also to make money. Right. So that's where the complication comes in because if they have to be in a separate category, then they have to choose. Right. Yes. And it's true. I think it's only because as a regular person, you feel like you can't get a car. So we kind of almost need to blame someone and say, yeah, you know, these private hire guys, the rental companies are getting so many,
but the whole priority scheme is not something entirely new. There have been arguments that maybe families should have a priority. Maybe once you have three or more kids, you get preference to buy ce at a certain price, you know. Yeah, I mean, and we do want to increase our birth rates in Singapore. So, why not? Right. What do you say to that? Walter?
Yeah. Ok. So this whole idea that we need to climb down the things like people owning multiple cars or alternatively giving families additional eligibility or discounts or whatever it's been going around for a long time as well. I can see the appeal of these kinds of ideas. Right. I think the problem with these ideas is not whether they are appealing or not. The problem is actually the implementation and the practicality of enforcement because if you talk about one of the ideas, a lot of people have said, oh, you know, all these rich,
I shouldn't be allowed to have like five cars and clogging up, you know, five cos, then the problem of course is that, well, all these rich people have got friends and family. So what makes you think they wouldn't just get around it by having their friends, family kids. And so just the one car under the name each? Right. So that's one for the families. There's a similar problem which is that if you put it to, for example, let's say a large family, right? What would you rather have, would you rather have this car we allow you to buy with a
special discount? Or would you rather turn around and sell that car or let somebody else rent that car from you and then profit from the difference? Well, some families say, oh, I'd rather have the extra money and then, then that becomes, are you going to start penalizing the family? Because you caught them renting out the car they were allowed to buy at the lower price. I mean, implementation is kind of tricky here. Yeah,
it's not like housing, right? For housing, it's like everybody must have a house so that subsidies can kick in but car
you could get by. But I thought it was kind of a nice idea because we do want to increase our population. So every time you get 1/4 kid or a third kid, here's your ce at 20,000. You know, a little Sun March. Which equivalent if I am in need of a car today, whether I'm a young person. What's my best, most prudent option? Arthur, best, most prudent option. I'm not a fan of evs but I feel that if you were to get by in Singapore, getting an EV is a good idea.
Why, why, why is it a good idea? Because the cost of ownership probably might be a bit lower. Of course, you pay higher taxes and whatnot, but you don't need to pump petrol or if not another way would be to get a petrol hybrid vehicle, which they are very frugal. Just check out what are the PH B drivers who are they driving? Those are the most efficient cars like Toyota sa you know, and those petrol hybrid vehicles, which a tank of petrol can last you 1000 km, you probably do not need to go to the shell
stations so often it's all about the cost of running and the maintenance. So what, what about leasing a car? I know a friend. He's got kids but he said he's just leasing a car. You pay, I don't know, 2000 odd a month for a car. Is that a good way to go? There are some people who probably say for short term usage and they are not willing to fork out the high down payment of 30 percent or 40% probably for a short term, they can do that because they know that if I buy a car I down the money, I sell a car after like 3 to 4 years,
the money is going to be gone anyway. Yeah. Yeah. So, so they rather do that, but of course they are paying a little bit more but to some of them, once they are leasing, they say it's problem free car break down. I just call them and they, they gave me a new car, the tire punctures, they send to some workshop cars down air con no good. They just go to the workshop. So, yeah, so some people, they are gunning for the convenience. There are so many options now.
25 years ago, we do not have options like this. Now, I could go to the HDB car park near me and get the, get go for the day. It's quite seamless in that sense. I feel like the car light might work and maybe eventually calibrate the demand for cars. But for now it's nice to know that there are more co coming onto the market. I think overall
I can feel people going, oh, finally some relief, some reprieve for people who do want to get a car. We'll get you guys back in a few years because it's going to be crazy if prices go up or still maintain at this rate, even with the 20,000, then I'll be like, what's going on? Just get used to paying $100,000. I hope I don't want to get used to it if he's wrong.
So at the end of the day, I think we know that having a car in Singapore is a luxury. I mean, our transport system works most of the time every now and then we did these occasions when something goes wrong. But to a large extent, I think it is effective. So if you're looking for a car, just weigh the pros and cons, think about how badly you really need it. Because I got to admit if I do the math, owning a car compared to taking a taxi everywhere I go all the time,
it's still more expensive to own a car. That's right. Thank you for listening to this episode and thanks to the team Janani Johari, Joanne Chan, Tiffany, Sa Wen and Toh Yan Yon sound mixing by Ken Delbridge. See you next week. Bye for now.