Category D Contribution to Category E Quota to Cease from May 2017

News Releases 20 Feb 2017 Budget Statement

            With effect from the first Certificate of Entitlement (COE) bidding exercise in May 2017[1], Category D (Motorcycles) will no longer contribute COEs to Category E (Open Category). This will stabilise the motorcycle population.

2. Category E provides flexibility within the COE system to cater to changing demand for different vehicle types. However, in practice, very few motorcycles have been registered using Category E COEs. Category E premiums are substantially higher than Category D premiums and motorcycle buyers would thus typically not bid for them.[2] In the last decade, less than 0.1 per cent of Category E COEs have been used to register motorcycles. As a result, the motorcycle population has been gradually declining over time.

3. In view of this, LTA has decided to cease the contribution of COEs from Category D to Category E. As Category D will no longer contribute to Category E, Category E COEs can no longer be used to register motorcycles.

4. While Category E has been used mainly to register Category B cars in recent years, it has also been used in the past to register Category A and C vehicles, when demand for these vehicles, and consequently their COE premiums, rose. Thus, we will retain the current contribution of 10 per cent from Categories A, B and C towards the quota for Category E.

5. LTA had considered other options to stabilise the motorcycle population. Currently, motorcycle buyers pay one-third of the Category E premium to register a motorcycle. One option is to reduce this one-third rate to, say, one-eighth, so that based on recent Category E premiums, motorcycle buyers would pay about $6,000 to use a Category E COE to register a motorcycle, which is about the recent premium of a Category D COE. However, this might once again not be the appropriate discount rate in future should Category D and Category E premiums diverge further. Another option is to reduce the Category D rate of contribution to Category E to below the current 10%.  However, this would only serve to slow down the rate of decline of the motorcycle population. On balance, LTA assessed that ceasing Category D’s contribution to Category E would be the most appropriate measure for now to stabilise the motorcycle population.

6. LTA will nevertheless continue to study how the Category E mechanism can be improved to allow the COE system to cater to changing demand for different vehicle types in a more equitable manner across all COE Categories and under all COE price scenarios. One potential approach being considered is differential bidding. Under this approach, Category E bidders bid on the basis of the additional premium they are willing to pay on top of a reference price, instead of on the basis of the full premium of a Category E COE as is the case currently. An example of the reference price could be the Prevailing Quota Premium (PQP) for the Category in which they wish to register a vehicle.[3] LTA will share more details in due course to solicit public and industry feedback for further assessment.


 

[1] The quota for the COE bidding period from May 2017 to July 2017 will be announced in April 2017.

[2] Motorcycle buyers would pay one-third the Category E premium to register their motorcycles.

[3] We are studying both the options of this additional premium being bid in absolute dollar amount, and of it being bid in percentage terms (i.e. if the lowest winning bid is x%, then the buyer of a Category D motorcycle using a Category E COE would pay (100+x)% of the Category D PQP). 

 

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