Monday, September 23, 2013

Sales of smaller Cat A cars slow after changes to COE announced


Some mass market car dealers said sales for smaller Category A cars has slowed since changes to the Certificate of Entitlement (COE) system were announced earlier this month.

Starting next February, the changes will include a new criteria for Category A cars to limit engine power to not more than 130 brake horsepower.

The changes will kick in next February.

Potential buyers MediaCorp spoke with are unsure where COE prices would head.

Some dealers have already introduced new deals to try and woo buyers of smaller cars.

Tan Chong Motors said under its new package, it's offering a S$20,000 discount.

It expects COE prices to fall by that amount in the next six months.

It is also offering buyers 12 rounds of COE bidding over a six-month period with a budget of S$60,000.

If COE prices are above S$60,000, buyers can choose to not purchase the car.

The COE price for Category A cars in the last bidding exercise was S$83,751.

Ron Lim, general manager of Tan Chong Motors, said: "If the continental mix or the luxury mix are clearing models at such a fast rate as what they have mentioned, they could've cleared the stock much earlier than next February. Given that, there could be a window period where COE might correct more aggressively and earlier than expected February or March."

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With so much time left till we're at February, don't expect the continental mix to simply stop importing their Cat A cars once current stocks have been cleared, thus the drop in COE won't probably happen so soon. Car buyers should sit back and watch how the prices will unfold until February arrives.


Thursday, September 19, 2013

COE prices rise across the board


Certificate of Entitlement premiums increased across the board in the second bidding exercise for September.

This was the first bidding exercise since the government recently tweaked the COE system, introducing a new criterion for Category A cars. From February next year, cars in that category must not have an engine power of more than 130bhp.

At the end of the tender on Wednesday, the COE price for small cars closed at S$83,751 - an increase of S$6,447.

The premium for big cars ended at S$86,239 - up by S$9,139, the biggest rise in the tender.

Open Category COEs, which can be used for any vehicle type but end up mainly for cars, rose S$7,001 to close at S$87,001.

For commercial vehicles, the COE prices inched up by S$2,002 to close at S$76,001.

COEs for motorcycles ended at S$1,703, an increase of S$43.

Industry watchers had expected COE prices to go up after the government tweaked the system last week.

However, what surprised them was the extent of the increase.

COE premiums for bigger cars surged by nearly 12 per cent.

Raymond Tang, honorary secretary of the Singapore Vehicle Traders Association, said: "After February, Cat B will have a big group of cars going in there... from Cat A. So, most of the people are worried that will cause the COE of Cat B to be overcrowded."

COE prices for smaller cars went up by more than 8 per cent.

Car dealers noted that these prices are inching closer to record highs seen earlier this year.

Ron Lim, general manager of Tan Chong Motor, said: "A lot of people are buying into the story that the COE will go up with this tweak. In a way, it is a self-fulfilling prophecy.

“People are rushing in, but with today's rise, hopefully consumers will take a step back and try to digest the situation and ask themselves whether it is a rational thing to do, to rush in like that.

“We are all trending near record high numbers, does it actually make sense or not is a good question."

Industry experts said that whether or not COE prices will continue to soar depends on the amount of car stock left from car dealers affected by the changes. It also depends on how much consumers can digest such price increases.

Car traders still expect car showrooms to continue to be packed in the months ahead.

However, they cautioned that if COE prices are being driven up so high now, a more drastic correction will be needed later.

SOURCE

Like clockwork, COE rocketed after the latest bidding since revealing the new ruling. The rush for the cars definitely inflicted this balloon, and the higher it will go if the rush doesn't subside. It will come to a point where consumers are finally finding it hard to swallow the inflation and start to back out, but that is unlikely.

With the CNY coming in less than 4-months' time, the hot period for car purchase is just round the corner. This will further add fuel to the fire and dealers are already expecting COE to hit above S$100k before February.


Sunday, September 15, 2013

High traffic at car showrooms after COE tweaks


Some car showrooms were packed with potential buyers on Saturday, following the changes to the Certificate of Entitlement (COE) system announced earlier this week.

Some carmakers even cut prices ahead of the changes, which will come into effect next year.

Swedish carmaker Volvo said traffic at their showroom doubled, as they dangled discounts ranging between S$20,000 and S$30,000.

The luxury car maker has five models with an engine capacity of below 1,600cc.

But these models also have a high engine horsepower of more than 130 brake horsepower.

From February next year, these will be transferred from the current category A to category B, competing with other premium brands.

Carmakers seem to be benefiting, at least for now.

Chow Yi Ling, marketing manager for Volvo Wearnes Automotive, said: "Since the announcement of the COE re-categorisation, we have seen a surge in showroom traffic. Customers are even coming in on weekdays. In fact, we even saw sales increase mainly in Cat A cars.

"Although there is a demand for Cat A cars, there are also people looking for Cat B cars at the moment, because they don't know what is going to happen after the policy sets in when all the current Cat A models are moved to Cat B, so people who are keen or ready to buy are going to buy now as well."

Customers said they are likely to buy now, as the cars they are eyeing could cost more once the new rules kick in.

The changes were made after several months of public consultation to better ensure elements of social equity in car ownership.

SOURCE

And just as expected, the car showrooms are packed with the rich buyers looking to loot a Cat A luxurious car one last time before they get shifted into the Cat B COE. With Volvo models going for discounts between 20-30k, I admit that it is quite a draw. However, take a step back and think.

If the demand rises, the COE bidding price will follow suit, and that will mean a rocketing Cat A COE, which somehow defeats any purpose of a discount isn't it? If a Cat A COE is 90k whereas a Cat B COE is 70k, the discounts will be all wiped out. Does it means these >130BHP cars will be cheaper now as compared to after they're shifted to Cat B? Not exactly so.


Wednesday, September 11, 2013

Luxury car dealers look for ways to clear stock


Some luxury car dealers are gearing up to lure buyers to their showrooms, beginning this weekend, in a bid to clear stocks of vehicles that will be reclassified as premium models from next February.

The move follows changes in the certificate of entitlement (COE) system, announced on Monday, in which a car's engine power will be included as a new criterion. Cars with over 130bhp or an engine exceeding 1,600cc will fall into Category B.

Dealers planning to go on a sales drive include Volvo agent Wearnes Automotive, which is looking to sell models like the S60 and S80. These currently belong to Category A - which caps engine displacement at 1,600cc - but will be re-classified under Category B next year.

Mr Victor Kwan, managing director at Wearnes Automotive, said the dealership will start clearing its 1.6-litre engine cars with "aggressive pricing".

SOURCE

Are you heading for the Volvo showroom this weekend? The S60 and S80 both sport a 1.6L engine but have a humongous 180bhp under the hood. In any case, with aggressive pricing comes the demand. Expect the Cat A COE to spiral upwards.


Top supplier of car parts concerned over new COE criterion for Cat A


In a rare move, one of the world’s leading suppliers of automotive components, Robert Bosch (South East Asia), has voiced its concerns about the Land Transport Authority’s (LTA) move to layer on engine power capacity in the classification of small cars for the Certificate of Entitlement system.

Asking the LTA to “reconsider” the new criterion for Category A cars, the company outlined two “unfavourable outcomes” from the tweak, which was announced on Monday and will be implemented in February.

First, manufacturers and dealers will bring into the market cars with “outdated technologies”, which are less fuel-efficient and will emit more carbon dioxide.

“This is a regressive step towards meeting the Singapore Government’s target of lowering overall carbon emissions by 11 per cent (potentially 16 per cent) by 2020,” Bosch said in a statement.

Second, it argued, manufacturers may try to meet the new 97 kilowatts criterion for cars with engine capacities of 1,600cc by curbing engine power output to pass pre-registration inspection tests. This could be done by encoding a limiter within the engine control unit of the vehicle.

Said Bosch: “This limitation can be easily removed after the vehicle leaves the showroom and is not easily detected during mandatory vehicular checks.”

It added: “Introduction of engine power into the COE system favours old technologies and is detrimental to the quality of life for Singaporeans, as it does not achieve a reduction in emission levels.”

Speaking to TODAY, Mr Klaus Landhaeusser, Bosch’s Regional Head, External Affairs and Governmental Relations (South-east Asia), added that the new regulations may lead to more car owners choosing to illegally modify their cars by leveraging on technology to circumvent the limiter placed in the vehicles.

While there are already laws in place against such illegal modifications, Mr Landhaeusser said tracking the horsepower of a car requires a chassis dynamometer, which regular vehicle inspection companies do not have as engine power inspections are not required in regular vehicle checks.

He said: “This is a very expensive machine and … it is only available in workshops which do the tuning themselves.” Bringing in the chassis dynamo systems will add costs to inspection companies, he added.

When asked why Bosch is concerned about the criterion, Mr Landhaeusser said: “We are developing systems for all car manufacturers, whether it is new or old technologies. We also have a very strong lead when it comes to saving the environment.”

In response, the LTA reiterated that it will be implementing “pre-registration safeguards through its vehicle type approval process”. The authority said it will not approve car models which have maximum power output specification that is lower than the same models approved previously, or what has been declared in other markets.

“This will serve as a deterrent against anyone who tries to tune down the maximum power output of his car to qualify for Cat A,” it added.

TODAY understands that the LTA has also brought in chassis dynamometers for the inspection of vehicle engine power.

On car manufacturers bringing in models which are less environmentally-friendly, the LTA said carbon emissions are already accounted for under the Carbon Emissions-based Vehicle Scheme.

“Carbon emissions and fuel efficiency are not good proxies for the value of a car, and could end up penalising mass-market models,” said an LTA spokesperson. The authority also emphasised that it will “review the criteria every few years and consider if adjustments are necessary”.

Dealers TODAY spoke to felt that most owners will not choose to illegally modify their cars.

Singapore Vehicle Traders Association Honorary Secretary Raymond Tang said: “Most car buyers usually go for luxury or continental cars just for the brand name and the status that comes with it. They are usually not so concerned about engine power.”

Motor Traders Association President Glenn Tan also pointed to liability problems of illegally modifying cars. “If they do that, they void the entire warranty of the vehicle because they are forcing it to work outside the operating perimeters of the vehicle,” he said.

“Also, there is an insurance and product liability problem. If you tune it outside of what is promulgated, the insurance can choose not to cover your vehicle. If you kill somebody, there is criminal liability.

“Whoever tunes it illegally, be it the dealers or the consumers, they will have some hand in criminal liability and they have to bear this in mind as well,” Mr Tan added.

SOURCE

So, the loopholes are covered by LTA. Cars with a different power rating as opposed to the official specs release will not be granted access to Singapore's market. Therefore, the prospect of down tuning car engines will not happen nor help the case.


Tuesday, September 10, 2013

Demand for used cars set to rise after changes to COE


The demand for used cars is expected to go up following changes to the Certificate of Entitlement (COE) announced on Monday.

The Singapore Vehicle Traders Association believes car buyers will consider buying used cars until the market stabilises.

Car dealers expect premiums in Category A and B to remain high -- at least until the changes in Category A kick-in in February next year.

Cars belonging to Category A must not have more than 130bhp of engine power. This is on top of the existing one that caps engine capacity at 1,600cc.

Dealers expect to see good demand for newer used-cars because these will still be more affordable than brand new ones. Used-cars that have a few more years left in their COE could also be popular.

Raymond Tang, honorary secretary of the Singapore Vehicle Traders Association, said: "Because of the changes, most consumers will be unsure what to do, what should they buy.

"I think the best way is to go in and buy a more stable car, aged, left with two years, three years, or four years and see what will be the situation in the market. And these range of cars they are very near to the paper value, and I think there is no risk for the consumer."

Before the changes take effect, industry players expect car agents to quickly clear some of their high powered-cars that are currently in Cat A. At the same time, consumers may also rush to buy a luxury Cat A car.

The used-car market took a hit in 2013 when the Monetary Authority of Singapore imposed loan curbs.

Under current rules that took effect in late February, used-car buyers can borrow only up to 60 per cent of the car's purchase price. The maximum period of the loan is also capped at five years.

Industry players said the re-categorisation of COE may prompt the entry of different car models to suit the new requirements. However, they doubt if more premium brand diesel models that typically have lower horsepower, may be introduced.

Mike Wee, owner of Mayfair Motoring, said: "Diesel cars at this moment is not that popular, because (in the past), you have to pay a road tax (which is several times higher).

"People are concerned next time if (the government) were to remove this benefit and the road tax may become five to six times higher. So, I think it's difficult for them to sell their cars."

An estimated 332 diesel cars were registered in Singapore last year. This is a relatively small percentage when compared with total new car registrations of nearly 28,000 in 2012.

SOURCE

Highly doubt diesel powered cars will pick up in Singapore, but for bystanders waiting to get a car, I guess mostly will wait till Feb'14 to make their decisions. As for second hand cars getting more attention, most likely it is only the older ones which will be snapped up as they're relatively much cheaper.

Come Feb'14, the best selling Cat A car will probably be VW Jetta 1.4 TSI. With its 1.4L engine, it's able to produce 122BHP of power and an impressive 200Nm of torque. Higher OMV and having a better premium feel, it's a winner.


Monday, September 9, 2013

Changes to COE: Government includes car engine power to categorisation


As announced today by the Minister for Transport, Mr Lui Tuck Yew, the Land Transport Authority (LTA) has completed the public consultation on possible refinements to the Certificate of Entitlement (COE) system to better ensure some element of social equity in car ownership.

After careful consideration, LTA said it will retain the existing criterion for Category (Cat) A that the engine capacity of the car should not exceed 1,600 cylinder capacity (cc), and add a new criterion that the engine power of the car should not exceed 97 kilowatts (kW) (equivalent to about 130 brake horsepower (bhp).

LTA said it will not implement a surcharge on multiple car ownership, in view of concerns over its effectiveness and possible impact on larger households.


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The C180K and 116i will be facing a massive drop in sales coming Feb'14 going by this new rule. However, it is also possible for car makers to detune their cars to 130BHP or below. After all the hassle and discussion, more is expected from LTA. This change is probably not going to do much to the sky high COE prices. We shall see next Feb. For now, enjoy the rush of buyers going for the models listed above, creating a rocketing Cat A COE premium.