SINGAPORE - Creating a certificate of entitlement (COE) category for car-leasing firms, which bid for vehicles that are later leased out as private-hire cars, will come with trade-offs under Singapore’s zero-vehicle growth policy, as it would mean taking COEs from the car COE categories.

If too many are taken from those categories, COE premiums could spike further, said Acting Transport Minister Chee Hong Tat in Parliament on Monday.

Yet, if the authorities do not move enough quota to this category, drivers will have to contend with inadequate vehicles to rent and commuters could be inconvenienced by supply shortages.

The acting minister made these comments in response to questions filed by Mr Gan Thiam Poh (Ang Mo Kio GRC) and Mr Yip Hon Weng (Yio Chu Kang) on COE bidding for private-hire cars.

At the last tender exercise in October, the premium for Category A COEs for smaller cars hit a record of $106,000. Records were also set for the sixth consecutive time for the Open category and Category B COEs for larger cars.

Mr Chee said that in the last three quarters till October, demand for COEs from car-leasing firms that register vehicles for private-hire cars was lower than that in 2022.

In the last three quarters, 21 per cent of the successful Category A bids came from such companies, compared with 27 per cent for the whole of 2022. In the latest bidding exercise, it was at 16 per cent. For Category B, demand dipped from 24 per cent to 23 per cent.

Mr Chee said that it is, therefore, unlikely that car-leasing firms are the main factor for the increase in COE prices, which comes at a time when demand from car-leasing companies has dropped.

“We will study if there are further options beyond COE bidding to address the concerns with car-leasing companies, recognising that private-hire cars do travel longer distances on our roads,” he said. “But they also serve an important function in providing point-to-point services for Singaporeans.”

Meanwhile, Mr Chee said rising COE prices in recent months were not driven by foreign buyers, and measures to cool demand from foreigners or households owning multiple cars are not likely to have an effect on COE prices as they form a small proportion of the market.

From February to October, Singapore residents were the largest driver of COE demand, said Mr Chee. They secured three in four Category A COEs, and two in three Category B COEs.

In contrast, foreigners clinched just 1 per cent of Category A COEs, and 4 per cent of Category B COEs.

The share of households that own multiple cars has also been on the decline.

In 2012, about 19 per cent of car-owning households had multiple cars. Currently, it is at less than 15 per cent. This translates to just 5 per cent of all households in Singapore, since about one-third of households own cars, said Mr Chee.

Mr Xie Yao Quan (Jurong GRC) asked if the Ministry of Transport would consider reallocating Category B COEs to Category A to help middle-income Singaporean households that need to own an entry-level car.

He cited data showing that in 2012, Category A vehicles formed 55.4 per cent of cars on the road, and that this had dropped to 49.5 per cent in 2022.

In reply, Mr Chee said that any decision to reallocate COEs will involve the same level of complexity as setting up a separate COE category for private-hire cars, adding: “How do you decide how much to shift or reallocate? And if you don’t do it correctly, it will lead to more negative outcomes for everyone.”

The population of Category B cars is growing because Open category COEs are nearly always used to register such vehicles. In the current method of calculating the COE supply for each quarter, 10 per cent of the supply for cars and commercial vehicles goes towards the Open category.

Responding to a question by Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) on whether speculation played a role in the recent surge in COE premiums and whether raising the bidding deposit requirement could deter speculation, Mr Chee said that on average, secured Open category COEs have been used to register vehicles within 14 days, well within the three-month window for them to be used.

He said that since June, only one such COE expired without being used to register a vehicle, which shows that bidding was based on actual demand for COEs, rather than dealers speculating.

Mr Chee also noted that most bids for car COEs are made within the final hour of a tender exercise, and the bid amounts entered tend to be close to one another.

“This shows that bidders are closely monitoring the clearing price and making bids based on their willingness to pay, while not paying more than necessary,” he said.

Besides looking out for speculative bidding behaviour, Mr Chee said the Government will also act against dealers who make false claims or misleading representations to consumers on the nature of their transactions. These include those who promise consumers that they can own a vehicle with a 100 per cent loan without the need for a down payment when it is effectively just a lease.

Under Monetary Authority of Singapore rules, buyers can borrow only up to 60 per cent or 70 per cent of the vehicle’s purchase price, depending on its open market value.

Correction note: An earlier version of this article quoted Mr Chee saying that since January, only one Open category COE expired without being used to register a vehicle. The Ministry of Transport has since clarified that only one such COE expired since June.