4 Key Reasons Why COE Prices Rose by $6,901
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The latest September result is out! Guess what, it increased to the same price before it dropped! The $6,901 increase in the latest COE result totally cancelled out the previous price COE drop of $6,900.
Is something fishy going on or is it a mere coincidence?
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It is apparent that the increment of COE is seen in all categories, particularly Category A with an astonishing increase of $6,901. While Category B only experienced a slight increase of $189, Category C also had a big jump of $3,888. Lucky number if you ask me. Category D had the lowest increase of $99 while Category E bidding ended with $1,007 increase. PQP, on the other hand, decreased from $44,081 to $42,564, a difference of $1,517.
It is rare to see that the increase and decrease amount in the same month are almost identical. With a difference of just $1, here are four widely discussed reasons that could have led to this result.
1. Aggressive Marketing By Car Dealers
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With the previous steep decline, many dealers rolled out attractive discounts to entice owners to purchase a car. With the lower car prices, coupled with the uncertainty on whether COE prices would drop further, it is widely speculated that drivers will be rushing to the showrooms and dealerships! And when the COE bidding ended, bid to quota ratio was almost 1:2, accurately reflecting the increased demand to purchase cars.
This pattern of owners rushing to showrooms could slow down due to the recent spike but then again, dealers are racing to clear their Euro 5 vehicles, thus there could be a possibility that the COE prices will stay within the range of the recent result or it might even rise even further.
2. Chinese Ghost Month
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In Chinese culture, the lunar 7th month, also known as the Ghost Month, is a time when the deceased are believed to be released from the netherworld to visit the living. During this month, the superstitious tend to avoid buying big ticket items like property and cars. As the majority of Singaporeans being Chinese, this superstition will most likely affect the auto and property industries. This has been speculated to be a key reason for the drop previously.
But with the huge drop in COE prices, superstition is not a big consideration as this kind of opportunities only come in a blue moon. With car prices being much more attractive, drivers seem to be more afraid of missing out on the discounts rather than any superstitions! Especially with the COE bidding happening on the last day of the Ghost Month, superstition definitely has a lesser impact compared to the previous round, which could be a key reason why drivers decided to try their luck this time round!
3. Presidential Elections
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Many have speculated that the COE results were related to the election. As shared in our first September COE article, uncertainty could be one of the reasons for the $6,900 drop. Owners probably were not confident to get a car at a period of time where the economy is unpredictable. With the elections so close as well, the focus was probably at the Presidential Election. It usually happens every 6 years, by this time it is considered special as this is the first reserved election for a particular race.
Since the President has already been chosen, the market seems to be starting to get back on its feet again. Owners are taking advantage of the previous drop and gaining back their confidence to get a car. Hence, this could be another reason for the increment to be the same amount as the drop - $6.9K!
4. Distributors Meeting Year End Targets
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As observed during the COE bidding, the COE prices was already at $40,000 half an hour before it closed at $42,900. Speculators believe this is a result of car distributors' involvement to control the COE prices. With the year ending soon, distributors and parallel importers could be banking on the increased in demand to close more deals to meet their annual targets, despite potential lesser margins.
The drop was also an advantage for dealers who are trying to clear their stocks of Euro 5 diesel vehicles to bring in the new Euro 6 diesel vehicles. Dealers are given only till January before they are unable to register the Euro 5 diesel vehicles anymore. With only 3 months left before January comes, it is a challenge for dealers to clear their stock off, especially if they are selling diesel-powered vehicles.
Summary
With a rise in COE prices across all categories, the only good news is that PQP prices went down by quite a fair bit, $1,517 to be exact. If you plan to renew your COE, this could be a great time to do it.
Finally, with the results for the September COE Bidding being official, it seems that majority of the discussions on the forums and our own drivers community believe that COE prices will continue to go higher. If you are interested to find out more, stay tuned for our next article, where we will do an analysis of what the forums and our own drivers community believe could be the reasons why COE will go up/down!
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Read more: Why the COE Fails at Discouraging Singaporeans From Driving
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