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On Monday (8 May), the Land Transport Authority announced a one-time adjustment to reduce the supply volatility of Certificate of Entitlement (COE) quotas for Categories A and B vehicles.

Category A ( smaller, less powerful cars) will see an increase of 24% in quota, while Category B (bigger, more powerful cars) will see an increase of 15% for the remaining five bidding exercises for this quarter.

In Parliament sitting on Monday, S Iswaran, Minister for Transport, said the one-off exercise “will bring forward and redistribute the supply from five-year COEs due to expire in the next projected supply peak”.

As these 5-year COEs cannot be extended and therefore have to be de-registered, LTA will be able to identify the exact number with certainty.

Steps to reduce volatility in COE quota supply

S Iswaran said that the Ministry of Transport (MOT) has been taking measures to decrease the volatility in COE quota supply, with a focus on smoothing out the supply of COEs in Categories A and B.

One method implemented by MOT has been to use the moving average of de-registrations in the four preceding quarters to compute COE quotas, instead of just the preceding quarter or the average of the preceding two quarters.

“We also expect the COE supply to start increasing substantially in the coming months as more cars reach the 10-year mark. ”

“Notwithstanding this, MOT and LTA have studied if there is more that we can do to smoothen the supply of COEs in Categories A and B, while adhering, importantly, to the cap on the overall car population over the 10-year cycle. ”

“Even as we make this move, I would like to emphasise two points. First, this will help to lessen, but it will not eliminate, volatility in supply. ”

He explained there will still be a degree of supply fluctuation due to historical factors and broader market conditions.

“Second, the long term upward trend of COE prices due to rising incomes and zero vehicle population growth will not abate. ”

The COE premiums experienced a significant increase in the latest bidding exercise, with Categories A and B reaching new record highs, breached $100,000 and $120,000 respectively.

Ten Members of Parliament had asked more than 20 questions about rising COE premiums.

LTA to gradually redistribute 6,000 COEs

A total of about 6,000 such COEs will be redistributed gradually over the next few quarters, starting from the second bidding exercise in May, which will start on 15 May 2023.

With this, the COE quota for May 2023 to July 2023 will be increased from 9,575 to 10,431.

“This does not change the zero Vehicle Growth Rate (VGR) on the overall car population,” said LTA, added that they has identified the specific vehicles in the vehicle registry with these 5-year non-extendable COEs.

“When the identified vehicles are deregistered in future, their quota will not be returned to the pool for bidding.”

Source: LTA
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