As COE premiums correct from recent high, more supply could be on the way

[SINGAPORE] Industry observers said that the dip in passenger car Certificate of Entitlement (COE) premiums is an expected correction, after the previous round saw new highs for multiple categories.

Anthony Teo, the managing director of automotive group Motorway, said: “After July’s first round of bidding, the premiums have backed away – so this is a small correction. But we are still near those highs as demand for cars is still strong.”

But while a quieter market led to the dip and more COE supply could be on the way, players said that premiums are unlikely to see major drops in future.

Take a dip

In July’s second round of bidding, which closed on Wednesday (Jul 22), Category A, for mainstream cars, was down 2.3 per cent at S$126,000 and Category B, for larger cars, was down 0.8 per cent at S$129,890.

In July’s first round of bidding, Category A set a new record at S$129,000, while Category B reached its highest level in almost nine months, at S$130,889.

Those results were driven by a number of factors, including a longer-than-usual bidding period between COE rounds, at three weeks instead of two. This allows dealers a longer time to collect orders, but also drives up premiums as there is higher demand for COEs on a larger order backlog.

Observers described Wednesday’s result as a return to normal for the COE market.

Raymond Ng, managing director for MG and IM distributor Eurokars EV, said: “Over the last two weeks, the market was generally good for China electric vehicle brands, but otherwise generally quieter than the previous round.”

“The S$129,000 mark was a psychological barrier so some consumers backed away. That together with a normal two-week period for orders meant the drop was within our expectations,” he added.

While there was still demand for some models, particularly China EVs, bidding was less intense as dealers were able to clear their backlog of orders.

One sales director of a European car brand said: “The number of excess bids for Category A dropped a lot. That indicates to me that the order bank of dealers is lower and the backlog has been cleared after The Car Expo in May. So, in line with the backlog drop, premiums have softened.”

Excess bids are the number of bids exceeding the quota for the category that round and are taken as an indicator of demand and bidding intensity. For Category A, the excess bids for July’s second round were down 54 per cent to 345.

More supply?

A forecast increase in the next COE quota for the July-to-October period may have also helped moderate premiums.

Automotive consultant Say Kwee Neng said: “The new COE quota, which promises to be 10 to 20 per cent higher than the previous one, may have given some pause to the dealers to go all out to secure their COEs.”

The COE quota is announced every three months, with the next period being August to October. The growth rate for the passenger car population is zero, so the quota for Categories A and B is chiefly made up of the average of de-registrations of the preceding 12-month period.

De-registrations for the two categories has been significantly higher in recent months.

According to Land Transport Authority data, the average monthly de-registrations for March to May 2026 came in at 10,805, some 24.6 per cent higher than 8,673 from May 2025 to February 2026.

Industry observers said this may have been spurred by higher COE premiums.

But they cautioned that demand is expected to remain high due to anticipated regulation changes, as well as China brands introducing more models and sustaining efforts to drive sales.

For example, industry leader BYD launched the Sealion 8 DM-i – a seven-seater, large sport utility vehicle – on Jul 9, and opened a new dealership in Tampines One on Tuesday.

Adelene Tan, managing director of BYD distributor and dealer Vantage Automotive, said sales of the new model – which utilises a Category B COE – exceeded expectations.

EV models are in high demand as they are the most cost-effective cars on the market now, thanks to EV-specific incentives. These will be reduced to a maximum of S$20,000 in 2027, from S$30,000 currently.

Vincent Ng, automotive business consultant at Vincar Group, said: “The ‘scare’ now is the S$10,000 reduction in EV rebates, which will take effect in 2027.”

This, he said, will “lead to very strong demand for the rest of the year”.

Say pointed out that there were many “who need to replace their car and have been sitting on the fence, but now decided to bite the bullet and commit” to EVs at current prices. “This is because they have been scared into that decision by runaway COE prices and the forthcoming reduction of rebates,” he added. “So it’s all feeding itself.”