Buyers of budget hatchbacks and luxury SUVs could soon be bidding for the same Certificates of Entitlement (COEs).
However, they would not walk away paying the same amount.
Last Thursday (8 Oct), the Land Transport Authority (LTA) launched a public consultation on merging COE Categories A and B into a single category for passenger cars.
Source: Land Transport Authority – We Keep Your World Moving on Facebook
To ensure luxury car buyers still pay more, LTA has also proposed a “feebate” system, short for fee-and-rebate.
In this proposed scheme, cheaper cars would get money knocked off the COE price, while pricier ones would pay a surcharge of up to S$15,000.
Members of the public have until 2 Nov to submit their views.
The idea is that luxury car buyers would compete among themselves and pay more, while everyday car buyers bid in a cheaper pool.
Electric vehicles (EVs) have muddied the waters. Because an EV’s power output is largely controlled by software, carmakers can tune down even premium models to qualify for Category A.
LTA noted that the same model, such as the Tesla Model Y, can fall into either category depending on its power rating.
This has led more luxury car buyers to crowd into Category A, pushing up its prices. Between February and June this year, Category A COEs cost more than Category B ones on three occasions.
One member of the public put it bluntly in online feedback to LTA: “Buyers of luxury vehicles are competing with budget car buyers in Category A.”
Source: Land Transport Authority (LTA)
Under the proposal, all car buyers would bid in a single pool and pay the same COE price.
LTA would then apply a rebate or surcharge to that price, based on the car’s value.
To measure a car’s value, LTA plans to use its Open Market Value (OMV), which roughly reflects the price paid to import the vehicle.
The OMV already serves as the basis for calculating the Additional Registration Fee (ARF), a tax buyers pay when registering a car.
Rather than assessing each car individually, LTA would use the median OMV of each car model to determine its feebate band.
Source: Land Transport Authority – We Keep Your World Moving on Facebook
The band for every model would be published yearly, so buyers know whether they will get a rebate or pay a surcharge before choosing a car.
Car retailers who disagree with a model’s band can appeal to LTA.
LTA said it also looked at using a car’s selling price or physical size, but found both lacking.
Selling prices can be lowered on paper through discounts or overtrade deals, where a dealer pays more than market value for a buyer’s old car. Size is also unreliable, as a luxury sports car may be smaller than a family multi-purpose vehicle (MPV).
LTA has put forward two possible structures, based on cars registered in 2025.
Under the three-band option:
Under the five-band option:
For example, if the COE price were S$100,000 under the three-band option, a Honda Jazz buyer would effectively pay S$85,000 for the COE, while a Toyota Alphard buyer would pay S$115,000.
The three-band structure is simpler, but the jump between neighbouring bands is bigger. Five bands would treat similar cars more evenly, but would be more complex to run.
LTA said the rebate and surcharge amounts take reference from the historical price gap between Category A and B COEs.
Source: Land Transport Authority – We Keep Your World Moving on Facebook
Car owners who renew their COEs today pay the Prevailing Quota Premium (PQP), the average COE price over the past three months.
If the categories merge, there would be just one PQP for all cars.
As Category A and B prices have moved closer in recent years, LTA said the feebate may not need to apply to renewals.
It added that transitional arrangements for existing owners, such as those with mass-market cars, could be considered.
LTA is also asking for views on Category E, an “open” category to register any vehicle except motorcycles.
Category E COEs draw their supply from Categories A, B, and C, which cover goods vehicles and buses.
In practice, buyers tend to use them for whichever category is most expensive, which has mostly been Category B cars in recent years.
If Categories A and B are merged, Category E would likely still go mostly to cars, at the expense of commercial vehicle buyers.
Source: Land Transport Authority – We Keep Your World Moving on Facebook
Some participants in LTA’s engagement sessions suggested scrapping Category E entirely.
However, LTA said this would hurt those who urgently need a car, as they would have to wait for the next bidding exercise.
Instead, LTA floated the option of keeping Category E for cars only.
LTA stressed that the changes are not meant to raise or lower overall COE prices.
This will still depend on demand and the number of COEs available.
The aim is to restore a clear distinction between mass-market and higher-value cars, it said.
Combining both categories into a larger pool could, however, help make COE prices less volatile.
LTA expects to complete the review by the end of the year.
Members of the public can share their views at go.gov.sg/coe-pcd-feedback by 2 Nov.
Also read: LTA urges buyers & dealers to be ‘prudent’ in bidding as Cat A COE prices hit 8-month high
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Featured image from Land Transport Authority – We Keep Your World Moving on Facebook and by MS News. Picture on the right for illustrative purposes only.