Re-assessing COE categories: The impact of private-hire operators on premiums

by Foong Swee Fong

The Straits Times Senior Transport Correspondent, Christopher Tan, pointed out that private-hire car population has increased 500% since their arrival ten years ago. In contrast, the private-car population has inched up by a mere 6.4%.

It is, therefore, true to say that private-hire car operators are major contributors to the sky-high Certificate-of-Entitlement (COE) premiums.

These operators have the financial muscle to bid high to secure COEs, and having secured them, can pass the cost to the hirers.

They also have an incentive to keep COE premium high as a sharp drop would result in them sitting on negative equity, given their huge holding of cars.

Also, a sky-high COE premium would drive private-car owners to give up their cars and take private-hire rides.

As perverse as it sounds, it makes business sense to keep COE premium high, albeit short-term thinking.

Indeed, the few big private-hire players – GRAB, Delgro, Gojek (Temasek linked?) – not only have the financial but monopolistic power, to influence the COE premium.

The original COE system did not conflate premium for private vehicle with premium for commercial vehicle. Thus there is a Commercial Vehicle COE category.

When taxi companies bidding for COEs in Category A chased up the premium back in 2012, they were taken out of the bidding process and instead paid the Prevailing Quota Premium (PQP).

In this way, commercial interest did not push up premiums for private vehicle owners. (Although I think it is still wrong as it is a loophole around the current 0% vehicle growth policy.)

Private-hire cars are commercial vehicles, period. They, as well as taxis, should be lumped with other commercial vehicles in the Commercial Vehicle COE category to reflect the true cost of doing business, and not “free-riding” in the private-car categories.