The Land Transport Authority (LTA) held a public consultation exercise from May to July 2013 on whether and how the Certificate of Entitlement (COE) and car ownership framework should be refined. The consultation, comprising surveys, focus group discussions and face-to-face interviews, generated robust discussion with a diversity of views.
2. About 3,700 respondents participated in the online survey and more than 200 participated in the face-to-face interviews as well as focus group discussions. LTA would like to thank everyone who took the time to participate.
Broad Findings from Public Consultation
3. LTA received significant feedback on how to better delineate Category A from Category B in the COE system, so that buyers of mass-market cars do not have to compete directly with luxury car buyers, and on how desirable or effective it is to levy a surcharge on multiple car owners to enhance social equitability. During the consultation process, suggestions on some other issues, such as implementing a Pay-As-You-Bid (PAYB) system1 and banning motor dealers from bidding for COEs, also surfaced.
Review of Category A
4. In recent years, car models generally viewed as luxury options2 have become more common in Category A. LTA thus sought views on possible refinements to the COE categorisation, in order to better retain the original purpose of Category A catering to buyers of mass-market cars.
5. Most respondents agreed that passenger-car COE categories should be reviewed. Most of them also preferred to use the Open Market Value (OMV) of a car as a criterion to separate Category A cars from Category B cars, as they felt that OMV is the most direct measure of the value of a car. On the other hand, some noted that the OMV of a model could fluctuate for different batches of the same car model brought in, due to variations in exchange rates and specifications for each car. The same model could thus fall into different COE categories at different times. Others cited criteria such as ‘family-friendliness’, engine capacity, engine power and carbon emissions. There were also those who felt that a combination of various criteria including engine capacity, engine power or value of the car would be more appropriate to keep to the intent of preserving Category A largely for “mass market” car models. Many also highlighted that new criteria such as OMV and engine power could be circumvented.
Multiple Car Ownership
6. LTA also sought views on the desirability and effectiveness of levying surcharges for multiple car ownership. This arose from feedback that those who own more than one car deprive others of the opportunity to own a car, given the limited number of COEs available.
7. Views on the multiple car surcharge were mixed. While there were many who indicated that multiple car owners should pay more for their additional cars compared to people who own just one car, most respondents at the focus group discussions were of the opinion that the surcharge would not be effective as it would be easy to circumvent and extremely difficult to enforce. Some of them (including those who did not own cars) were also concerned about the fundamental fairness of such a measure. Several people highlighted that the existing vehicle tax and road tax structures were already very progressive, as luxury car buyers need to pay significantly more than buyers of mass-market cars. There was no consensus on how such a surcharge should be designed – whether it should be levied on the second or third car onwards, on individuals or households, whether it should be one-off or recurring, or levied on companies.
Other Issues Raised
8. There were a number of suggestions to implement a PAYB system. The argument is that such a system would result in more conservative bidding and therefore lower COE prices. However, academics and experts on auction theory argued that the current COE bidding mechanism, where all successful bidders pay the lowest, market-clearing price, results in the most efficient outcome under our open bidding system where the bid prices are open to public scrutiny.
9. There were also numerous suggestions to ban motor dealers from bidding for COEs. This was based on sentiments that these dealers profit from high COE prices and drive up COE prices, as they have a greater incentive to secure COEs to close deals, rather than minimise costs for buyers. On the other hand, a number of people noted that the COE bid price is ultimately dependent on buyers’ willingness to pay. Some have also pointed out that dealers typically commit in car purchase agreements to absorb the additional cost should the COE price rise higher than expected and thus have every incentive to bid low once a purchase agreement is signed. Others commented that such a ban could be easily circumvented by buyers who may ask dealers to bid in their name. A good number of buyers also indicated to us that they prefer to have the convenience of dealers bidding for them and felt that vehicle buyers should have the choice of deciding whether they want to bid on their own or through a dealer. Banning dealers from bidding could also result in buyers having to find separate financing for their COEs.
10. LTA is currently in the final stage of the COE review, consolidating the views from the public consultation exercise, and will likely take another few weeks to finalise the options. We will announce the details when ready, and would like to assure the public that whatever decision is made, they will be given time to adjust.
Annex: Presentation on Findings of the Public Consultation
1 A PAYB system is one where every successful bidder pays exactly what he or she had bid, as opposed to everyone paying the lowest bid price needed to clear the market and match demand with supply.
2 These models generally have significantly higher value (i.e. higher open market value) and better performance (i.e. engine power) compared to mass-market models.