More COEs Coming, But Higher Prices Expected

The Land Transport Authority (LTA) announced yesterday that there’ll be an increase of 14.7% of Certificate of Entitlement (COE) quota in the coming quarter. More quotas should normally mean that COE prices should see a drop. But it seems that this might not be the case anymore, thanks to new players in the market to compete for COEs.

COE quotas are set to be increased in every category from May to July this year. Category A quotas, for smaller cars, will go up by 9.3% to 4433 per month. Category B quotas, for bigger cars, will increase by 21% to 2924 per month. Category E, the open category, will have quotas increased by 11.4% to 794 per month.

So while more COEs should mean lower prices, the problem is that there are new players in the market to snap up COEs. Lion City Rental, owned by Uber, apparently submitted more than 800 bids in the last bidding exercise. They haven’t They secured only about 600 COEs, which is still quite a sizeable number. More worrying, market talk has it that Lion is looking to put 1800 new cars on the road. That means they’ve only filled up just one-third of their needs.

If that’s not enough, rival company Grab is also expected to be doing the same. They haven’t started yet, so that simply means there’s even greater demand for COEs.

There’re more, aside from Grab and Uber. It was reported a few days ago in the Straits Times that SMRT has ordered a fleet of more than 300 vehicles in a bid to compete with private-hire fleets run by third-party taxi app providers. This will come under new subsidiary known as Strides Transportation. Trans-Cab, the second largest taxi operator here, is looking to do likewise. Then, there’s Prime Taxi, which started a fleet back in 2014, plans to add 200 or so taxis in the next one year.

Taxis were removed from the COE bidding process three years ago to lessen pressure on car buyers, as they needn’t have to compete with fleet operators for the limited number of COEs in each bidding period. Now it seems both taxi companies and others starting to expand into a fleet operator role, car buyers are going to feel a lot more heat from the intense competition than ever before. Perhaps we’ve got to wait out till the big boys have gotten their cars.