The recent increase in Certificate of Entitlement (COE) is "unlikely" due to demand from car leasing companies which bid for vehicles to be used as private hire cars (PHCs), said Acting Transport Minister Chee Hong Tat during Parliament on Nov. 6, 2023.

The latest bidding exercise on Oct. 18 saw premiums for Category A and B hitting record highs.

Category A closed at a record of S$106,000, while Category B hit S$150,001.

Chee noted that during this latest bidding exercise, car leasing companies won only 16 per cent of the Category A quota.

Over the past three quarters, these companies secured about 21 per cent of Category A COEs, a decrease from the 27 per cent they obtained in Category A COEs in 2022.

The proportion of Category B winning bids also reduced slightly from 24 per cent in 2022 to 23 per cent in the last three quarters.

As such, the data indicates that COE prices have risen when demand from car leasing companies has decreased, making it unlikely that they are the primary factor contributing to the price increase, Chee said.

Separate COE category for PHCs would have "trade-offs"

In response to Members of Parliament (MPs) Gan Thiam Poh and Yip Hon Weng's suggestions on having a separate COE category for car-leasing companies, Chee said there would be "trade-offs" to introducing a separate category.

Due to Singapore's zero-growth policy, having a new category would mean that the quota for this new category would have to be drawn from existing categories, he said.

With PHCs' demand evolving and varying from quarter to quarter, it would be difficult to determine the exact quota required to meet the needs of drivers and commuters.

"If we move too much of the existing quota from Category A and B to this new category for PHCs companies, it will further reduce the supply in these categories, and there is a risk that COE prices may spike further," Chee explained.

"On the other hand, if we do not move enough quota to the new category, drivers will end up with insufficient vehicles to rent and commuters will be affected by shortages in [point to point] services."

PHCs play an important role in ensuring the availability of point-to-point services for commuters.

The demand for point-to-point services is increasingly met by PHCs rather than taxis, Chee noted.

"They also serve more individuals and households compared to private cars," he said.

To meet evolving commuter needs and ensure that services stay relevant, LTA has started a review of the industry structure and regulatory framework for point-to-point providers.

Chee added that the Ministry of Transport (MOT) will study if there are further options beyond COE bidding to address the concerns around car-leasing companies.

Supply of Category A and B to increase by 35% each

The Land Transport Authority (LTA) announced on Nov. 3, 2023, that supply for Category A and Category B quota for the fourth quarter of 2023 will both increase by 35 per cent compared to the third quarter.

An extra 1,614 certificates will be injected into the supply pool.

Industry players have welcomed this move, as the increase this time is more significant than in previous quarters, Chee said.

He also highlighted that this 35 per cent increase is larger than the proportion of bids won by car leasing companies in the last three quarters.

"With the increase in supply, we hope that COE prices will moderate. We know prices will also depend on market demand, and demand is not within the government's control," he added.

Nonetheless, MOT will continue to monitor closely and explore ideas to improve the situation, Chee said.

Top photos from Unsplash