Saturday, February 27, 2010

COE Revenue to rise by 50%....

The cost of owning a car is going to be a lot higher than in previous years. I believe the revenue from ERP has increased significantly too given the number of new gantries that have popped up here, there and everywhere. When you design a system, and if your desire is to deliver a high quality of service at an affordable price, you whenever you raise prices it has to be tied with a higher quality of service if inflation remains stable. Our transport system operates in a different fashion. The public transport has become so packed and uncomfortable in the morning rush hour and that pushes people to buy cars and use them to go to work. That in turn pushes up the price of COE and ERP (cost of usage). Those who can't afford to drive their cars any more go back to taking the crowded buses and MRTs. The SMRT will have no problem raising prices this year or next (after the elections?) to appease its shareholders because most commuters can't switch to driving a car given the high cost. Transport cost increases fast without any corresponding service quality improvement. The only thing that is certain when our traffic congestion become worse and when the SMRT rides become more suffocating is the govt coffers getting filled up faster and SMRT shareholders getting higher dividends.

My previous posting on this topic [Link] discusses why no other country or city has needed to implemented COE & ERP and no city has collapsed without them. Someone posted in the comments section that the system can be improved if the every cent collected is used to increase road capacity, improve bus services + extend the MRT/LRT system. Yes that would close the loop if the money is used to supplement what the govt is already spending on public infrastructure. But that is not the case, the solution for road congestion is still to increase ERP rates and set up new gantries. Singaporeans pay the most for ownship and car usage and our govt collects the most revenue per capita in the world from this system - Singaporeans pay the most in the world and the quality of service they get is far from the best in the world. All this leads to frustration...not that we are unused to frustration... it is really how much we can take before we do something about it.


COE revenue projected to rise by 50% to $900m [Link]


CERTIFICATE of entitlement (COE) prices continued to climb as bidders scrambled for the permits ahead of a probable cut in quota this year.

COE premiums for cars up to 1,600cc rose by 1.8 per cent to $20,340 at yesterday's tender. COE for cars above 1,600cc was 3.1 per cent higher at $23,889. They were surpassed by the premium for Open COE, which can be used for any vehicle. This rose by 8.2 per cent to close at $24,229.

Commercial vehicle buyers have to bear a higher premium than those buying a 1,600cc vehicle. Their COE price increased by 9.9 per cent to $23,501. Bikers will feel the pinch as well. The COE price for motorcycles shot up by 17.5 per cent to $1,001.

Industry players are bracing themselves for premiums to rise further. Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, pointed to vehicle tax revenue projections revealed in Monday's Budget as a sign.

The Budget projected that vehicle-related tax revenue will dip by 16.5 per cent to $1.5 billion in the 2010 financial year, from $1.8 billion last year. But at the same time, COE revenue is projected to rise by nearly 50 per cent to $900 million, from $610 million last year. According to Mr Lim, the market read this as a clear indication that there will be fewer cars (on the back of fewer COEs), and COE premiums will soar.

Last year's average COE premium for cars up to 1,600cc was $15,000, while the average COE price for cars above 1,600cc was $16,400. Based on the projected rise in COE revenue, the two averages will be close to $22,500 and $24,600 respectively this year.

Motor Traders Association president Tan Kheng Hwee predicted COE premiums will hit $30,000 to $35,000 'by year-end if the economy continues to grow'. 'Although COE supply will be reduced sharply, new car demand is still moderate,' she said, as most cars here are relatively young. But as these cars age, '$50,000 to $60,000 is not out of the question in a couple of years' time'.

Mr Neo Nam Heng, president of the Automotive Importers and Exporters Association, concurred, saying: 'I think prices will breach $30,000 in three months' time.'

He said yesterday's increase was also fuelled by a weaker euro, which has been hit by fears of spreading credit defaults in countries such as Portugal, Spain and Greece. He said: 'The weak euro benefits the European makes, which in the first place have bigger profit margins to bid for COEs.'

Recent sales performances of key European marques seem to support his observations. Last month, Volkswagen registered a record 393 cars sold in one month.

Motor traders said the sharp rise in Open COE premiums may also be a sign that speculators are back. Open COEs are transferable, and speculators secure these COEs to resell them to motor traders who may have failed to clinch some COEs.

A fast-rising Open category indicates that speculators are bullish about future premiums.

This article was first published in The Straits Times.


Anonymous said...

Actually COEs even once reached $100K in the past in 1995, and yes Mah Bow Tan was the Transport Minister then. A new 1400 or so cc Japanese car could then cost $130K!

People were then speculating in COEs and cars like stocks.

Some people even made money by selling their cars and switching to public transport, although cars was always regarded as a depreciating asset item.

So this is nothing new, it happened before and will happen again.

But as always, PAP will still win elections whatever happens. This is a constant among changes.

Anonymous said...

The papist transport policy is nothing but a big scam. They raised the cost of car ownership in the name of controlling traffic congestion. After paying so much, Singaporeans are still getting more and more congestions on the roads. Where have all the hundreds of $billions collected from vehicles owners gone to ?????

Anonymous said...

The Golden Era has arrived - Indeed. LOL

Anonymous said...

Don't be so cynical lah anon 17:59

Paraguay was under 60 yrs rule of 1 party. Japan 50 yrs. Malaysia also almost 50 yrs.

Once old man dies there's no focal point within pap. Make no mistake some of them hate each other. Internal disintegration will occur.

Singaporeans are not so stupid.

Anonymous said...

The "public service" provider will then remind you that the price of oil went up so does bus fare.

Subsequently, when the oil price drop, transport minister will then tell you that previous price revision got nothing to do with oil price.

Its buddy talk, isn’t it?

Anonymous said...

anon 21.08, just imagine the traffic in $ingapore is smooth flowing everywhere and no congestion at all.

Will the garmen have anymore excuses to raise ERP, COE, taxes and so on?

So there is absolutely no desire for them to solve the problem totally but just manage it so that the CASH keeps coming in!

One more point, we pay ERP and according to garmen's promise, will ensure traffic at certain speed. This is an agreement between us right?

When the speed on highway slows to a crowl, should they switch ERP off and give us the refund? : )

Anonymous said...

Goh Meng Seng had previously done some analysis on the problems of the Singapore transportation system. The findings were similar to those done by Lucky.

The underlying reason for the increased cogestion is because of the FT policy. The Singapore population has increased signfiicantly but the transportation network has not been upgraded to keep pace with the increased population.

The following is the analysis on SMRT and how they maximised profit by reducing the frequency of trains.

The second is on SBS Transit. It shows how SBS Transit wasted money of high tech toys that don't work (IRIS, bus arrival time system)) rather than putting more buses on the road.

The final analysis is on cars/taxis. It shows how people are switching to using cars because the public transport system has become cramped and uncomfortable to use. LTA itself is guilty of profit maximisation. They have increased the number of COEs in excess of their road building program. This causes congestion. LTA then comes along and raises ERP charges.

Unforunately, Minister Raymond Lim is based in East Coast GRC. The demographics of that GRC are a fortress so it is impossible for any opposition to try and make Mr Lim accountable for these policy failures. Singaporeans are therefore likely to continue to have to live with these policy failures.

Post election, my expection is for a major hike in MRT fares. SMRT has stated that they want to buy new trains and new signalling equipment to upgrade their service. This will be a substantial investment which SMRT will "recover" from Singaporeans that have to take MRT because they cannot afford to buy a car.

Anonymous said...

A PAP minister once said this:

"If there is no retrenchment, then I worry..."

phrase it slightly differently and u get, "if there is no traffic jam, then I worry..."

so u see, it is not about solving problem. It is about suppressing workers (1st instance) and making $$$ (2nd instance).

recruit ong

Anonymous said...

We have a Competition Commission that suppressed Singapore-Malaysia Coaches, medical profession and pest controls. When it comes to what really matters (Public Transport), they are completely silent and allow the inefficient monopolies (SBS/SMRT) to thrive and make profits at the expense of the poor.

Ghost said...

To be fair, the main reason for high COEs is not the government but Singaporeans. If Singaporeans are less car-crazy, the COE prices will not go up. It’s that simple.

Anonymous said...

Actually our government is very "prompt" and "helpful" :

Since your car often get stuck in the traffic, they "help" you promptly with additional/higher ERP's.

Since you often can't get a taxi, they "help" you promptly with higher fares and additional surcharges.

Since your labour productivity is low, they "help" you promptly with additional/higher levies.

Since the public transport service is bad, they "help" you promptly with higher fares.

So what are you complaining about?

Anonymous said...

You missed the most notorious one:

To "help" the poor, increase GST!

Anonymous said...

... and to "help" those who are cheated by the banks, you are sent back to the bank!

Alan Wong said...

Where in the world can we find public listed MRT & bus transport companies will not report any losses but instead are guaranteed to make profits year after year ?

Our Singapore Public Transport Council will see to it as their duty that any application for fare increases will be approved.

I was just wondering if there are any hanky panky behind all this ?

Anonymous said...

... and to "help" those who are cheated by the banks, you are promptly sent back to the bank!

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Anonymous said...

We have a Competition Commission that suppressed Singapore-Malaysia Coaches, medical profession and pest controls. When it comes to what really matters (Public Transport), they are completely silent and allow the inefficient monopolies (SBS/SMRT) to thrive and make profits at the expense of the poor.

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