Tuesday, August 27, 2013

COE Debate - Single Private Car Category with OMV Multiplier for Quota Premium

It will take LTA another few weeks to finalize the tweaks to the COE system from the feedback from more than 3,700 people in the public consultation exercise.  Much of the discussion centred around how the different COE categories for private cars should be changed.

Most are in favour of moving from the existing criteria of engine capacity to a car value-based categorization.   However, this will not address how to fairly allocate the limited certificates to each category.  I would prefer all private car COEs (categories A, B and E) to come under one single category since it is impossible to please both the mass market buyers and luxury-make buyers if allocation across more than one category is required.  The tweak is that the final payable quota premium will be multiplied by the OMV.

COE bids will be made for a base of $10,000 OMV value.  Let's consider the successful winning bid for the exercise is $30,000.

A mass market buyer of a car with OMV of $16,000 will have to pay the computed quota of $48,000 (16,000/10,000*30,000)

A luxury-make buyer of a car with OMV of $40,000 will have to pay the computed quota of $120,000 (40,000/10,000*30,000)

In this way, there is no complex matrix to categorize cars which may result in luxury-make dealers importing models that meets the lower category criteria.  In the long run, the quota premium will come to a stable state.

Doing away with the Category E Open will also forced all buyers to go through the same process and stop any fast-track purchase by paying a premium for dealers' stock of Category E certificates. This category is taken as a benchmark for dealers to set their selling price.  I would even go a further step to separate car price from COE bid amount so that buyers are certain about what they are paying for.  Buyers should sign for an agreed car price and the maximum bid amount. In that case, dealers will not get any windfall from a sudden drop in quota premium when they set a low COE rebate.

LTA can also take a leaf out from the property cooling measure of Seller Stamp Duty (applicable to residential property sold within a year of acquisition) to introduce a special duty for vehicle ownership transfer during the first year to deter dealers from bidding and registering vehicles like the "double transfer" deals in the past.

I hope LTA will provide a fair and efficient method to resolve the madness after the stormy 23-year of the current COE system.


Anonymous said...

Let LTA decide which car model belongs to which CAT.

CAT A for mass market.
CAT B for luxury.
CAT E for very luxury cars. (Ferrari, Lamborghini, etc).

This will help to prevent manipulation of OMV and simplify the implementation.

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