Sunday, April 17, 2011

Messed up by the Formula

Source - ST701

The Straits Times reported on April 16 that Second-hand car market in high gear - Tight COE supply sees used-car sales on track to hit 10-year high. POWERED by a meagre COE supply, used-car sales are continuing to rev up. In the first quarter of this year, 15,441 cars changed hands, a figure that is more than twice the 6,900 new cars sold, going by figures from the Land Transport Authority.

Sigh ... so how many of you are facing a situation which your current ride's Certificate Of Entitlement is expiring? The statistics indicate that more and more motorists have resorted to buying pre-owned cars. The critical question is whether the COE allocation formula can be tweaked for a balance between demand versus supply and what is the basis for the equilibrum point.

In LTA's current formulation for the quota system, the following are salient points
(a) The vehicle population growth rate has been set at 1.5% per annum for 3 years from 2009 to 2011.

Is this a reasonable target aligned to the population and GDP growth set by the government? Isn't it too low since the Electronic Road Pricing scheme is implemented to charge by usage rather than ownership?

(b) Taxi operators pay the prevailing quota premium (PQP) to replace their taxis within 6 months of de-registration of their taxis. If the taxi is not replaced by paying PQP, the de-registered taxis would be recycled as replacement COEs.

Why is this option not given to citizens but only to taxi operators? I would be glad to pay the PQP to register a new car and deregister my old one when the COE expiry approaches.

(c) COEs that have been successfully secured by bidders but were not utilised during their validity period were recycled.

There were about 250 certificates that were secured but had gone to "waste" as it made business sense for the dealers to forgo the low $5,000 deposit and bid for a lower priced COE in a downtrend.

(d) Category E receives 25% of the de-registrations from in each category.

We will eventually see an increase of luxury cars as most Category E COEs are used to register such cars. I am of the opinion that a single category based on quota premium per 1000 cc should serve the market better. If I register a 1,000 cc car, I pay the quota premium of eg. $10,000. For an expatriate getting a 4.8 l luxury sports car, he will have to pay $48,000.

(e) Adjustments for over-projections in Quota Years 2008 and 2009, as well as expired COEs from 2009 are spread over 22 bidding months from Apr 2010 to January 2012. An adjustment of -3,188 was factored in the 1st 4 months quota (Apr-Jul 2010), and the remaining -9,577 adjustments will be adjusted the next 12 months' quota (Feb 2011 - Jan 2012).

Thus, the tightening will continue until the start of 2012. For prospective upgraders, I would recommend holding out until then if your COE is not expiring.

In the mean time, we should all take good care of our rides and make them last as a new ride is an expensive option for now.

No comments: