Impact of High COE Prices on Cost of Living

Ms Low Yen Ling asked the Minister for Transport (a) what is the significance or implication of high Certificate of Entitlement (COE) prices on the cost of living in Singapore; (b) whether the Ministry will consider reviewing the COE system in view of the rising cost of living; (c) how many car-sharing schemes are available to the public presently; and (d) what is the present take-up rate of such schemes.

Mr Lim Biow Chuan asked the Minister for Transport whether LTA will consider (i) implementing a "pay as you bid" system to curb excessive bidding for COE; (ii) prohibiting car dealers from bidding for COE and paying for the COE deposit on their customer's behalf; and (iii) taking action to rein in the rising prices of COE.

Mr Lui Tuck Yew: The Vehicle Quota System (VQS) is necessary to keep the growth of our vehicle population at a sustainable rate. It relies on a market mechanism for a Certificate of Entitlement (COE) to be obtained for vehicle ownership. COE prices reflect market demand and can be influenced by various external factors. These include how well our economy is doing, the interest rate environment and even the introduction of new models by motor dealers.

While costs of housing and private road transport contribute to the consumer price index, the costs of basic necessities for Singaporeans are measured under the Monetary Authority of Singapore's Core Inflation measure. This indicator eased to 2.9% in March 2012, from 3% in February, and the Government is closely monitoring the situation.

Ms Low Yen Ling asked about car-sharing schemes and their take-up rates. Indeed, as we lower the vehicle growth rate, we will have to see how it is possible for us to expand the scope of car-sharing schemes to better meet the mobility needs of Singaporeans and allow them the occasional access to a car without having to own one.

There are currently three car-sharing companies in Singapore, namely Car Club, WhizzCar and KahShare. As at April 2012, they have about 300 cars at over 100 locations around Singapore, catering to a membership of about 6,450 motorists. This is a sizeable increase from about 5,000 members and 270 cars in September 2011. LTA will be working closely with other agencies to see how we can further facilitate car-sharing.

Mr Lim Biow Chuan suggested two measures to improve the VQS. Members may recall that both were studied by the Government Parliamentary Committee for the Review of the Vehicle Quota System (VQS) in 1999. Their recommendations not to implement them are still valid today, and I will briefly explain why.

Proponents of a Pay As You Bid (PAYB) system believed that it would discourage buyers from submitting excessively high bids to increase their chance of securing a COE. Feedback gathered from industry members and academics during the 1999 review revealed that the PAYB method has several drawbacks which I will not repeat here. More importantly, there is less merit for a PAYB system now that LTA has implemented the open bidding system for COEs since 2001. Open bidding means that bidders are aware of the current COE bid price. There is no incentive for bidders to put in bids higher than what they are prepared to pay for.

Mr Lim's other suggestion is for motor dealers to be prohibited from bidding for COEs as they are believed to be responsible for driving up COE prices. Today, vehicle buyers can bid for COEs themselves. They have access to the same information as dealers under the open bidding system. However, in most cases, buyers still prefer motor dealers to bid on their behalf for convenience and sometimes to take advantage of better package deals. The buyer remains in control as the total price of the car is agreed between the buyer and the dealer.

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Even as we affirm that the VQS is still relevant and that we need to lower the vehicle growth rate, we are prepared to exercise some flexibility in how we implement these changes. In view of recent de-registration data, I have asked LTA to review if we can take a more graduated approach to reduce the annual vehicle growth rate from 1.5% to 0.5%, and be more flexible with the adjustment component for the over-projections of vehicle de-registration in 2008 and 2009.