Debated in Parliament on 5 Feb 2013.
Mr David Ong asked the Minister for Transport (a) what measures are in place to prevent a runaway of the price of a COE, especially for small cars (1,600cc and below); and (b) what can be done to alleviate the transport component of unit business costs for SMEs as a result of rising COEs.
Mr Gan Thiam Poh asked the Minister for Transport whether the Ministry is reviewing the entire COE system with the objective to prevent a runaway of the COE price.
Madam, may I have your permission to take Question Nos 11 and 12 together?
Yes, please.
Madam, given the limited supply of COEs and our bidding system for COEs, prices would be determined largely by demand. Market demand, in turn, is influenced by many factors, such as how well our economy is doing, the interest rate environment, the loan financing options available, and even the introduction of new car models. In short, prices are a reflection of the COE market at work.
The Government is mindful that some businesses have a critical need for vehicles and that is why several concessions are in place to help businesses with their transport costs. Businesses bid for COEs for commercial vehicles in a separate Category C, and do not have to compete with private car buyers in Categories A and B. In addition, the Additional Registration Fee (ARF) for most
Page: 24
goods vehicles is set at 5% of the vehicle's Open Market Value (OMV), instead of the 100% OMV applicable to cars.
Many suggestions have been put forward for tweaks to the COE system. While the suggestions are well-intentioned, it would be important for us to look at them closely, to consider if they can really be effective in promoting lower prices or greater stability in the COE market, without distorting the market inappropriately. I would also add that, left to its own, the market has seen, in the past, instances of COE prices going down, sometimes sharply. This happened in around 2009, likely due to the weak economy. So, in conclusion, buyers do make a conscious decision not to rush in during periods when the market is particularly exuberant. I think it is useful to bear that in mind.
Madam, I would like to thank the Minister of State for the reply. Does the Minister of State agree that with the rising COE prices, even for small cars up to 1,600cc, to over $90,000 now, the COE system is skewed in favour of the wealthy? Will the Ministry also really look at a review and probably a reform of the entire COE bidding system in cognisance of the current socio-economic situation of Singapore, as well as the role of car dealership in the COE bidding process?
Madam, I thank the Member, Mr Ong, for his questions. I think it is quite useful to take a look at the profile of car owners in Singapore. I had shared earlier, in response to the first two questions by Ms Mary Liew and Dr Intan Azura Mokhtar, that nearly one in two households today own a car. And if we were to look deeper at the one-in-two households owning a car and ask what sort of dwelling these car owners reside in, and then look at car ownership amongst a population group that we are very familiar with, which is the HDB flat dwellers, the ownership of cars amongst HDB flat dwellers is about one in three.
So, if you look at ownership profile, then I would say that, yes, there are some who are able to afford cars to a very large extent but this does not preclude a very sizeable population group that we are very familiar with − what we call the HDB heartlanders − quite a large number of whom also own cars. So, I hope that addresses his concern. We are very mindful of this and that is why there are two different categories of COEs – Category A and Category B – to allow people who are in need of a car but do not need it for status or other reasons. And they really need it for family purposes, and that is what the COE categories are designed to do.
Page: 25
Mdm Speaker, I would like to ask the Minister of State: does she think that the COE prices should be the same for cars with the same engine capacity, for example, between one that is a Toyota Camry versus one that is a Lamborghini, in the first place? I am reflecting the point of the hon Member, Mr David Ong, when he mentioned about parity. The Minister of State just mentioned about people having different needs, different cars for different reasons. The current OMV system does not stratify that. So, when we now see that BMWs and Mercedes are the top-selling cars in Singapore, something is wrong. Toyotas and Nissans used to be the top. It seems that the middle class and the smaller cars are being completely squeezed out of the market. Can the COE system be reviewed and how do we re-balance that again?
I thank Dr Lim Wee Kiak for his questions. I think what Dr Lim is referring to is that there was a time when the prices of COEs between Category A and Category B were quite different. So, it was quite different in the past, and I hope that I can explain that a little bit further. But, over time, that gap has closed. So, whether it is Category A or Category B, that gap has closed. One of the reasons why this has happened, as has been pointed out by many observers, is that, increasingly, you will find premium makes also in Category A. For example, in Category A, you might find a Mercedes A Class. So, there is a perception that there is some activity going on that is causing the premium makes to also push out cars. This is something actually very worth studying. One contributing factor is that, worldwide, for environmental reasons, even premium makes are pushing out cars of smaller engine capacity. And this might have contributed to a closing of the gap between the Category A COE prices and the Category B COE prices.
Dr Lim mentioned the example of a Lamborghini. I am afraid I really do not know what a Lamborghini costs, but I think the engine capacity of a Lamborghini would not put it in Category A.
Madam, a supplementary question. Would the Minister of State also look at the profile of those who own light-goods vehicles under Category C of the COE? I wonder how hawkers and small-time contractors can afford to renew COE or buy a replacement vehicle in order to continue their businesses.
Madam, indeed, that is a group of car owners that we are concerned about and we are looking at various ways in which they can be helped.
Page: 26
Mdm Speaker, I would like to ask the Minister of State two supplementary questions. The first question is about the equitable distribution of COE in different categories. One of the reasons why there are more luxury cars in Singapore is because of Category E. If you add Category E and Category B together, we note that Category E is almost used exclusively to buy big cars; the combined COE in both Categories B and E is 50% more than Category A COE for August 2012 to January 2013. If we compare the figures about 10 years ago for the period from 2001 to 2002, the COE in Category A itself is a lot more than that in Categories B and E added together. The second question is whether the Minister of State would consider pegging Category A to the OMV of the car rather than just the engine capacity, so that cars are cheaper and could be made more affordable to Singaporeans.
I thank Mr Ang for his two supplementary questions. His first question relates to the distribution of COEs in the various categories. Precisely for the reasons that he articulated, the number of COEs that are recycled back after they are de-registered has been adjusted. It used to be that for de-registered COEs, 25% of them went to Category E. And precisely for the reasons that was cited by Mr Ang, we have reduced that percentage and now 15% goes into Category E, while the rest goes back to the categories from which the cars were originally registered. So, that is one way in which we are seeking to rebalance this.
On his second question of whether COE categories ought to be redefined, not based on engine capacity but perhaps based on OMV or some other measures, indeed, we recognise that these are valid ways in which we could rethink how the COE categorisation can be done, and we are open to reviewing them. So, I would urge the Member to be patient.
The road is a livelihood for many. And for construction companies, food sellers and logistics companies, they have fed back to me that they do find the COE prices quite high and it does eat into their bottom line considerably, if not very considerably. I appreciate the Minster of State stating that there are existing schemes to help this group and they are grateful for it.
However, I would like further thought − hence, my supplementary question – on the current segregated bidding mechanism for these commercial vehicles. If we are focused on road usage and the number of vehicles on the road and part of that computation includes sedan cars and household cars, then would it be possible to disincentivise through a higher COE for households which have
Page: 27
three or more vehicles, such that there is more space on the road for people who need roads because of their livelihoods? If this could be at least considered, we may have some room to reduce COE prices for those who really need the roads for a living.
Mdm Speaker, before Mr Christopher de Souza came into the House, there was an earlier question that was filed by Ms Mary Liew and Dr Intan essentially proposing the same thing – whether we could create, for example, a mechanism that will allow first-time car owners or first car buyers to have access to lower COE prices, and I had explained the difficulties in doing so.
In quick summary, Madam, it has to do with two things. The first is that it is hard for us to say, definitively, why a person who is buying a car for a second time is always less deserving than one buying it for the first time. I cited the examples of families which have grown in size because they have had more children or elderly members have moved in. There could also be businesses which are growing very well and they need that additional vehicle to service their expanding customer base.
One difficulty is with how we can say, definitively, certain car buyers need a car more than other groups of car buyers. The second difficulty relates to the fact that this is a policy that will be quite easy to circumvent. Today, if a family was forced to register a car in the name of first-time car owner, it would be quite easy for him to ask a relative to stand in and be registered as the first-time car owner. Similarly, a business could set up a subsidiary to own just a car. So, there is a practical difficulty with implementing policy of this nature. That is something we have to bear in mind, whether it can be effectively implemented, otherwise, we would be doing something that gives the impression of helping first-time car buyers when, in fact, it does not really. That is something we have to bear in mind.
PAPERCUTS