Measures to Reduce COE Price Volatility and Encourage Switch to Electric Vehicles

Ms Nadia Ahmad Samdin asked the Minister for Transport whether the Government will consider a new model of a Certificate of Entitlement targeted specifically at encouraging the switch to electric vehicles.

Ms Nadia Ahmad Samdin asked the Minister for Transport (a) since the adjustments to the Certificate of Entitlement (COE) system in August 2022, whether quarter-on-quarter volatility of COE supply has been reduced as intended; (b) if so, whether COE prices has stabilised; and (c) if not, what other measures are being explored to stabilise COE prices.

Mr Melvin Yong Yik Chye asked the Minister for Transport in light of the persistently high COE prices despite LTA's adjustment to the method for computing COE quota available for bidding from August 2022, whether the Government will consider reviewing the possibility of removing the need for Category E (Open Category) COEs as it is almost exclusively used for large cars.

In land-scarce Singapore, along with the need to control traffic congestion, we limit our vehicle population and allocate the quota through the Vehicle Quota System (VQS), where bidders bid for a Certificate of Entitlement (COE) which is required to register a vehicle.

COE prices reflect the supply and demand for vehicles. Recently, with less vehicles reaching 10 years of age, there have been fewer de-registrations and a consequent fall in the supply of COEs. On the other hand, demand from individuals and companies, including point-to-point (P2P) service providers, has remained resilient. With lower supply and strong underlying demand, COE prices have increased.

Creating additional COE categories, be it for Private Hire Cars (PHCs) or Electric Vehicles (EVs), will further fragment the market, reduce the available supply in each category, and increase price volatility. PHCs are essentially no different from privately owned cars except that they have the flexibility and autonomy to take passengers thereby augmenting our supply of P2P vehicles. Establishing a separate category for PHCs with rules such as requiring a minimum number of trips to prevent abuse would be difficult to enforce and adds to the compliance cost for PHC operators, drivers, and ultimately consumers.

For EVs, instead of using the VQS system which would be the wrong policy tool for this purpose, we have schemes that directly incentivise the adoption of EVs. The EV Early Adoption Incentive and the enhanced Vehicular Emissions Scheme, when taken together, provides a rebate of up to $45,000 off the upfront cost of purchasing an electric car.

The Open Category E mechanism provides the necessary flexibility in the VQS to accommodate changes in demand for different categories of vehicles. Removing Category E would merely reduce this flexibility to respond to changes in demand patterns without any impact on the underlying demand.

The Land Transport Authority (LTA) continues to study ways to improve the COE system. In March this year, to encourage more prudent bidding, we increased the bid deposit for Category D COEs from $200 to $800 and shortened the validity period of temporary COEs from six to three months. In August, to reduce the quarter-on-quarter volatility in quota supply, LTA adjusted the method for computing the COE quota available for bidding. As a result, the quota for the August to October 2022 quarter was lower than that for the May to July 2022 quarter by 11.5% as opposed to 21.4% had the revision not been made.

LTA will continue to monitor the VQS and market situation closely.