The Land Transport Authority (LTA) is consulting on a proposal to merge Singapore's Certificate of Entitlement (COE) Category A, which covers cars with engine capacity up to 1,600cc, and Category B, which covers cars above 1,600cc but below 2,300cc. The move aims to simplify the bidding process and address persistent premium gaps between the two categories.
The proposed merger would create a single COE band for most private cars, leaving only a separate band for high‑performance or luxury vehicles above 2,300cc. LTA says the change could improve market efficiency, reduce price volatility, and make it easier for first‑time buyers to secure a COE.
Economic and Market Impact
If the categories are combined, the average COE price for mid‑range cars could fall, potentially lowering the overall cost of new vehicles. A lower new‑car price may increase the supply of relatively newer used cars, putting downward pressure on used‑car prices. Dealers have warned that a sudden shift in supply could disrupt inventory planning, especially for those specialising in Category A models.
Political and Community Impact
The proposal has drawn comments from members of Parliament and consumer groups. Some lawmakers view the merger as a step toward a more transparent transport policy, while consumer advocates caution that reduced COE premiums might be offset by higher road‑tax rates if the government seeks to maintain revenue.
What Happens Next
LTA will open a public consultation lasting 30 days, after which it will release a detailed impact assessment. A final decision is expected before the next COE bidding exercise, scheduled for early 2025. Stakeholders are advised to monitor the consultation outcomes and prepare for possible adjustments in pricing strategies.
Potential Benefits / Supporting Perspective
Potential Benefits of Merging COE Category A and B
Supporters argue that combining the two COE categories will streamline the bidding process and reduce price disparities that have persisted for years. By eliminating the artificial split at 1,600cc, the market can respond more naturally to demand, allowing prices to settle at levels that reflect true consumer willingness to pay. Lower COE premiums for mid‑range cars could make first‑time ownership more attainable, especially for young professionals who have been priced out of the market.
Dealers that focus on mainstream models may benefit from a steadier flow of new cars, reducing the need to hold large inventories of Category A vehicles that often sit unsold for longer periods. A more predictable COE price environment also helps financial institutions assess loan risk more accurately, potentially leading to better financing terms for buyers.
From a policy perspective, the merger could free up administrative resources for the Land Transport Authority, allowing it to concentrate on broader sustainability goals such as promoting electric vehicle adoption. If COE costs fall, the government may be able to offset revenue losses through modest adjustments to road‑tax rates rather than imposing higher fees on specific vehicle types.
Overall, the consolidation is seen as a pragmatic step toward a more efficient transport ecosystem, aligning Singapore's vehicle registration framework with market realities while preserving the core objective of limiting vehicle growth.
Potential Drawbacks / Critical Perspective
Potential Drawbacks of Merging COE Category A and B
Critics warn that merging the COE categories could create new uncertainties for both consumers and the automotive sector. A single COE band may lead to higher average premiums for smaller, fuel‑efficient cars that previously benefited from lower Category A prices, potentially discouraging environmentally friendly vehicle choices.
Used‑car dealers specialising in Category A models could face inventory imbalances if demand shifts abruptly toward larger vehicles that retain a separate premium band. This could result in price volatility in the secondary market, harming consumers who rely on stable used‑car values for budgeting.
There is also concern that the government might compensate for any shortfall in COE revenue by raising road taxes or introducing new fees, which could offset the intended affordability gains. Some members of Parliament have highlighted the risk that a merged COE could exacerbate congestion if lower entry costs encourage more car ownership.
Finally, the public consultation period may not capture the full range of stakeholder feedback, especially from smaller dealerships and consumer advocacy groups that lack the resources to submit detailed responses. Without comprehensive data, the impact assessment could underestimate long‑term market disruptions.