Impact on COE Prices Exerted by Car Rental Companies that Lease Out Private Hire Cars

Mr Chua Kheng Wee Louis asked the Minister for Transport (a) whether there is any evidence to suggest that car rental companies, particularly those leasing to the private hire vehicles (PHVs) market, have affected Certificate of Entitlement (COE) bid prices in the past year; (b) if not, whether a study on this will be conducted; and (c) whether such rental cars and those used for PHVs can be removed from the COE bidding process.

There is no evidence that private hire car (PHC) companies have caused the increase in COE bid prices. LTA has been monitoring the market closely and, over the past year, the demand for COEs from PHC companies as well as the overall PHC population have been stable.

Recognising the role which shared point-to-point (P2P) transport plays in our land transport system, from 2012, taxi operators did not have to bid for a COE to register their taxis. Instead, they draw from the pool of Category E (Open) COEs and pay the Category A COE prevailing quota premium. Taxi availability standards were also introduced and taxi operators can grow their fleets by up to 2% per annum, subject to meeting the standards.

Unlike taxis, PHCs are, essentially, privately-owned cars that have the flexibility and autonomy to take passengers, thereby augmenting our supply of P2P vehicles. Hence, PHCs are treated like privately-owned cars under the vehicle quota system. Removing PHCs from the bidding pool and creating a new category with specific requirements, such as a minimum number of trips to prevent abuse, would be difficult to enforce and add to the compliance cost for PHC operators, drivers and, ultimately, consumers.

LTA will continue to monitor the P2P sector and study schemes for further enhancement.

Thank you, Mr Speaker. I just have a supplementary question for the Senior Minister of State. As she has mentioned, in 2012, taxis were removed from the COE bidding system and I think, in July 2016, then Transport Minister Mr Khaw Boon Wan shared that, on PHCs, the Government will monitor its rate of growth and uptake of COEs to see if a similar move will be appropriate.

If you look at the point-to-point transportation sector today, the number of PHCs are about 70,000 versus about close to 14,000 taxis – about five times more. So, in terms of the relevance of PHCs within this P2P sector, it is now much more than that for taxis. So, I am just wondering if the Senior Minister of State and the Ministry will consider having a similar treatment when it comes to COEs for both PHCs and taxis.

As I have explained in my reply earlier, for PHCs, essentially, they have the autonomy and they have the flexibility to decide if they are going to pick up passengers. So, basically, they are like privately-owned cars and if they do take up passengers, it means it helps us supplement the P2P sector in terms of the vehicle population.

But if you are going to put them like taxis into a separate category, as I have mentioned, first of all, there is an additional difficulty because we will then have to have specific requirements like ensuring that they comply with minimum number of trips and that is actually very difficult to enforce. It will add to compliance cost which will, eventually, trickle down to consumers.

But in addition to that, this call or request to review COE categories is actually quite a perennial suggestion.

Essentially, there is a trade-off between having specific categories to meet specific requirements versus ensuring that there is sufficient COE quota for that category. Actually, whether you have a specific category for PHCs or something else, the fact is that it is going to lead to further fragmentation and volatility, particularly when COE supply is low. So, if you are looking at COE premiums and so on, basically, it is, fundamentally, demand-and-supply for vehicles that determines COE premiums.

As I have also said, we will continue to monitor the situation. For PHCs, we have been closely watching the market and there is really no evidence that the PHC companies have caused an increase in COE premiums. The population of PHCs is stable and the demand for COEs has also remained stable. And, in fact, the PHC entities have actually not submitted bids or reserved prices which are higher than non-PHC entities.