COE review: What the proposed changes will likely achieve and what it won’t address

Since the government announced a review of the COE system in March, there has been much anticipation regarding the proposed changes. The Land Transport Authority (LTA) aims to address the system's shortcomings, but its primary objective is not to lower COE prices, which have been in the six-digit range since July 2025. Motor dealers hope the review will shield Category A COEs from luxury car models, as these high-end cars push up premiums.

However, the LTA's plan does not involve categorizing cars based on their luxury level. Instead, it proposes merging the two COE categories and adjusting the COE premium based on the car's open market value (OMV). Cars in the middle tier will not have any adjustments to their COE prices. The LTA believes that using OMV as a benchmark is a better measure than technical specifications, as it is already the basis for vehicle taxes.

This change would ensure a clearer distinction between mass-market and higher-end cars, with the Tesla Model Y RWD 110 incurring a surcharge and the BYD Atto 3 receiving a rebate. While the proposal aims to prevent premium car buyers from over-bidding, the mass-market car buyer will still likely face an inflated baseline. The LTA will determine the rebate-surcharge amounts based on the historical price gaps between Category A and Category B COEs, with a maximum gap of $30,000 between the highest rebate and the highest surcharge.