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Sunday, March 17, 2013

Wither COE?

So the gahmen got its desired effect after the dramatic measures for cars. COE is generally down from the incredible high where a stupid piece of paper cost more than the selling price of a car in most part of the world. 

But this doesn't seem to please anybody. Nobody I spoke to is happy with the new measures especially the cap on the financing. Not car buyers since now they got to fork out more cash, not car sellers since there is now a smaller pool of customers to sell to and not the financial institutions since they cannot do more financing. And I guess, even the credit companies who are not bound by the MAS imposed cap, are complaining. The sudden surge in interest will drain their resources and draw the attention of the authorities on their largely un-supervised operations. 

For us in the industry, we were expecting some sort of measures to be taken after COE continues to rise. With the many "feedbacks" from the public, it was only a matter of time before the gahmen bowed to the pressure and do "something". Most of us guesstimate was a restoration of the financing curb to 70%/7 years financing. But what none of us expect was the deep cut to 60/50 and across the board for new and used cars. We had of course not expect any major change to the COE bidding process itself. That is after all, a cash cow worth over S$2 billion a year and therefore untouchable.

But then again, with so many silly and impractical suggestions for the COE, it is any wonder the gahmen is not going to do anything about it. Those people who write in to the press to offer their suggestions. I think they think through their arsehole. Imagine a suggestion to limit car to 1 per household! How practical is that? And what about allocating COE base on needs? Who is going to play God and decide who has the greater need? Me think these people are only thinking of themselves when they put pen to paper. They never thought how absurd or impractical their suggestions were. Of course there are some sensible suggestions but these are not going to make any impact to the COE so what's the point? Like reclassifying the categories. Where there money to be made, motor dealers will still be smart enough to beat whatever system the gahmen can throw at them.

In my opinion, there is only one way to curb the ever increasing cost of the COE and that is to take the car dealer out of the equation. Right now, the way I see it, it is not the amount of financing or any other reasons that cause COE to go up to this level. It is because the dealers are the one bidding for the COE. And the dealers with the biggest margin can bid highest hence we see the continental cars people doing so well. What the dealer do is to package in the COE into the selling price. Then they go and bid for the COE. Once successful, the buyer pays for the whole package through a financing. To clinch the sale, the dealer will bid high knowing that they need to only pay for the lowest successful bid.

Now take the dealer out of the equation and make the buyer bid for the COE himself. Which car buyer in his sane mind will bid high for a COE? And if it is not package into the car price, there will be no financing so that will curb the impulse of the buyer to bid too high as he has to cough up the cash for the COE. To make it work even better, the successful bidder will have to pay based on his/her bid amount. That will reduce the temptation for buyer to anyhow bid hopping to pay the lowest successful bid. With the COE in hand, then the buyer can approach the car dealer to buy his car. Car dealer will no longer be able to profit from the manipulation of the COE and will have to sell the car at a transparent price of OMV+taxes+profit margin.

This I think is the only way to really get the COE to come down but I don't think it gonna happen any time soon. The gahmen is ain't never going to lose that S$2 billion cash cow!


  1. You are absolutely right. My opinion too. To think that the govt is actually colluding with the dealers and has the gall to call it market price.

    The govt don't have the interest of the people at all in mind, it is interested only in ensuring its cut of the COE pie it shares with the dealers. No prize for guessing who made up the pie that is to be carved up!

  2. plus...the bidder has to pay his bid in cash within 7days...

  3. I think now very good. No more 100% financing, ready buyers pool shrink. Therefore, very few bidding. For you in the industry, can shake legs.