Proposed COE changes could better separate luxury, mass-market models but may not lower prices

Transport experts have weighed in on a proposed change to Singapore's Certificate of Entitlement (COE) system, suggesting that combining the two car categories based on engine capacity and power, and implementing a fee-and-rebate system, could widen the price gap between luxury and mass-market models. The Land Transport Authority (LTA) has launched a public consultation on this proposal, seeking feedback on two fee-and-rebate structures with three or five bands based on each model's median open market value (OMV).

The rebates or surcharges would cap at S$15,000 each, creating a potential S$30,000 difference in COE price between the lowest and highest bands. While this system would more directly separate luxury and mass-market cars, experts noted it would not lower overall COE premiums. The common premium would still be set by the marginal buyer, and rebates or surcharges could influence buyers' choices and bidding strategies.

Some experts favored a five-band system with smaller adjustments between bands, arguing it would reduce "cliff effects" and incentivize lower-OMV cars. However, this approach could also increase the complexity of the COE system and potentially cause a rush to purchase cars before the new bands take effect.