Thursday, March 25, 2010

Panic Bidding

Quota premium for all COE categories surge in the latest bidding exercise, responding to the anticipated 28% reduction in COE allocation in the next cycle. 

Cat A Cars/Taxis: $28,389 (up $7,587)
Cat B Cars: $36,089 (up $9,700)
Cat E Open: $42,001 (up $14,441)

Many dealers were taken aback by the large increase in this round of aggressive bidding.  I am also surprised by the bullish outlook especially for those who chased up the Open category bids.

Here is my take on what is going to happen running up to the next bidding exercise:
1. Dealers are going to increase their selling prices to stay in business.  They will try to price competitively but the money for COEs goes to the government, not them.

2. Existing buyers who agree to buy at a price lower than the base cost plus COE will be asked by the smaller dealers to top up for COE.  Otherwise, they will continue to bid at the earlier projected level which is bound to lose out in the next few rounds of bidding.  Thus, no TOP UP = no NEW CAR.

3. Do you think there are more new buyers?  It all depends on the economic outlook.  The ones that will suffer most are those who need a car for work or family chores and cannot rely on public transportation.  I reckon that the upcoming April 1st bidding exercise  will be more subdue after this aggressive round.

It will be wiser for motorists to always track the trend of COE bidding so that one can eliminate the need to spend unnecessarily for a piece of paper.  The current Prevailing Quota Premium (PQP) has risen to $21,421 for Category A and $25,190 for Category B.  Those whose rides are more than 8 years old could have renew the COE at less than $4,000 (or $2,000 for 5 years) if they have heed my advice in my March 2009 COE prediction then.  And those who want a new ride, the best time is to buy during the dip of the economic crisis when demand is at a low.  How else can you be "lucky" to win a $2 COE?  So ... did I do so? You can bet everything on it.

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