Some 9,604 cars were deregistered in the first three months of 2024, a 72.9 per cent jump from the 5,555 deregistrations during the same period in 2023.
It was also the highest since the second quarter of 2021, when 10,468 cars were scrapped. Higher deregistrations lead to more certificates of entitlement (COEs) becoming available for bidding in the coming quota periods.
This comes as more cars have had their COEs – which give people the right to own and use a vehicle here – revalidated to be used beyond their 10th year.
Some 776 cars had their COEs revalidated in the first two months of 2024, 66.5 per cent more than the 466 recorded during the same period in 2023.
Vehicle owners have a month to revalidate their COEs after expiry. That is why data on revalidations from the Land Transport Authority (LTA) lags behind scrappage figures by a month.
When a car is scrapped, the COE is released to the pool for bidding. The average number of monthly deregistrations over the previous four quarters is the main determinant of the COE supply in any given three-month quota period.
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LTA car population data shows that in 2024, more cars will reach their 10th year than in previous years. This is the age when the cars are likely to be deregistered, which means they can no longer be used in Singapore, or have their COEs revalidated.
In 2014, there were 28,615 car registrations, 30 per cent more than the 22,008 registrations in 2013. The increased deregistration rate seen in the first quarter of 2024 is related to the higher number of registrations 10 years ago.
Annual registrations continued rising in the years that followed, peaking at 91,775 car registrations in 2017.
Cars with five-year COE revalidations made earlier are also fuelling deregistrations. Such COEs cannot be revalidated further.
In 2019, there were 20,095 such cars, with their COEs due to expire in 2024.
The price of revalidating a certificate is the average COE premium of the preceding three months. Owners can choose to do so any time before their car’s COE is due.
Ng Choon Wee, commercial director of Komoco Motors, the distributor of South Korean automaker Hyundai, said the higher COE revalidations in January and February were influenced by COE premiums starting to come down in November 2023 after both car COE categories hit record highs in October 2023.
COE prices bottomed out in January 2024 – at S$65,010 for Category A, for instance – before trending upwards again.
In January, the cost to revalidate a Cat A COE, meant for smaller cars, for 10 years was S$83,385 – S$10,567 cheaper than doing so in December 2023. So far in 2024, the Cat A revalidation cost was S$78,482 at its lowest.
Some motor dealers expect more revalidations were done in March.
Ng, however, does not expect the number of revalidations to significantly undermine the return of COEs for bidding.
He also does not believe COE premiums will return to the levels seen in January, as the COE supply is below what the market demands.
Sabrina Sng, a managing director at multi-franchise motor group Wearnes Automotive, said demand will outpace the COE supply because owners of older vehicles would shop for a replacement before deregistering their cars.
Future COE supply
Between opting to deregister their vehicle and revalidating their COE, scrapping is usually more popular among car owners, Ng of Komoco Motors said.
Besides getting the scrap value back, owners who intend to continue driving would typically prefer buying a new car, he said.
That is because it will have more advanced features, better fuel efficiency and lower maintenance costs than a 10-year-old car. “It just makes more sense in the long run,” Mr Ng added.
The low scrappage rate across most of 2022 and in the earlier part of 2023 meant that there were fewer COEs available for tender in 2023. This was seen as a contributor to rising COE premiums that year.
Senior executives from dealerships representing mass-market and premium car brands had thus welcomed the government’s move in May 2023 to bring forward COEs guaranteed to expire in future peak-supply years.
This was to reduce big swings in COE supply from one quarter to the next.
Taking into account the two car categories and the Open category, which is almost exclusively used to register larger cars, the COE supply for May to July 2024 is 3.2 per cent more than the previous three months.
In contrast, the February to April quota was 19.3 per cent higher than that for November 2023 to January 2024.
Nicholas Wong, chief executive at Honda agent Kah Motor, said dealers know the number of COEs reallocated only on a quarterly basis, rather than over a longer period. This introduces uncertainty into the market.
Taking the long view, Michael Wee, managing director of Eurokars EV, the agent for Chinese car brand MG, said: “We don’t know which year the redistributed COEs are taken from. So we won’t know the impact on the recovery of COE supply in the future.”
Ron Lim, head of sales at Nissan agent Tan Chong Motor, said: “The issue is whether the increase in COE supply is fast enough to meet the pent-up demand that has been building over the last two years of the Covid-19 pandemic.
“So far, it is obvious that current supply is still a long way off in terms of meeting current demand. This translates to COE premiums moving north since the first tender in January.” THE STRAITS TIMES
