SINGAPORE: During the parliamentary sitting on 12 November, Associate Professor Jamus Lim from the Workers’ Party, questioned whether the recent announcement of 20,000 additional Certificate of Entitlement (COE)s represented a firmer commitment by the Ministry of Transport (MOT) to stabilise COE prices and reduce volatility, addressing the “feast and famine” cycles in COE supply.
The Sengkang MP inquired Transport Minister Chee Hong Tat about the potential impact of ERP 2.0, which is expected to reduce car usage as suggested by LTA, and whether this could allow for an increase in the vehicle quota without worsening congestion.
Lim asked if MOT would consider either increasing the total vehicle quota or reducing COE prices if the vehicle numbers did not rise.
“My understanding is that, the total number of vehicles, currently in the vehicle quota system is something in the order of 1 million in Singapore.”
“so the question in the sense is that with ERP 2.0, if the intensity of usage falls, whether we could allow for the possibility of an increase in that total number or, if we don’t then naturally that reduce usage would also imply a reduction in COE prices.”
Minister Chee supports potential increase in COE supply if ERP 2.0 effectively reduces congestion
In response, Minister Chee explained that the objective of last year’s “cut-and-fill” approach was to reduce the Peak-to-Trough Ratio (PTR) in COE prices.
He noted that adding an additional 20,000 COEs over the next few years would help further stabilise the pricing, making it less volatile over time.
While acknowledging the 6% reduction in vehicular usage due to ERP 2.0, Minister Chee clarified that this was just one factor in the overall reduction in vehicle usage.
He emphasised that the decline was more closely tied to changes in travel patterns post-COVID-19 than directly linked to ERP 2.0’s implementation.
“We are already seeing that, even though we are still in the initial stages of installing ERP 2.0, we now have 150,000 to 160,000 vehicles, which is less than 20% of the total vehicle population.”
Mr Chee agreed with Assoc Prof Lim’s suggestion that, should ERP 2.0 effectively manage traffic congestion and prevent gridlocks, the COE supply could potentially be further increased.
Regarding recent COE price increases, Minister Chee noted that they were likely driven by strong demand from local individual buyers, rather than foreigners or car-leasing companies, according to LTA data.
Louis Chua questions car-leasing firms’ influence on COE premiums
Sengkang MP Mr Louis Chua then pointed out that the recent reduction in participation from car-leasing companies might indicate their influence on COE premiums.
Chua also compared the current situation to 2012 when the Land Transport Authority (LTA) removed taxi companies from the COE bidding process due to their significant impact on prices.
At that time, taxi companies accounted for up to 25% of Category A COEs.
He asked Minister Chee to clarify if current trends suggest that car leasing companies still have a substantial effect on COE prices.
In response, Mr Chee acknowledged that, while the percentage of COE bids from car leasing companies had decreased from 2022 to 2024, COE prices in 2024 had actually risen compared to 2022.
He suggested that the rise in COE prices was unlikely to be driven solely by car leasing companies, though they contributed to overall demand.
Chee also addressed the suggestion of creating a separate COE category for private hire cars (PHCs), stating that this was under study.
However, he emphasized that such a change wouldn’t lead to an immediate influx of COEs.
Any new category would require transferring quota from existing Categories A and B, which is a complex process. The decision on how much quota to transfer would need careful consideration.
He noted that PHCs are often used for dual purposes—being used as private vehicles at certain times and for point-to-point services at others.
This hybrid usage makes it difficult to define the number of vehicles that should be classified under a new category, adding complexity to the quota transfer process.
Mr Chee concluded by stressing the need for a careful study of various solutions to address COE supply concerns and expressed openness to exploring alternatives beyond creating a separate COE category for PHCs.
Chee: Injection of 20,000 COEs unrelated to distance-based charging plans
Earlier, Mr Chee Tat told the House that the additional 20,000 COEs from February 2025 are not connected to any potential implementation of distance-based road pricing.
“We have not made a decision on whether to implement distance-based charging, though ERP2.0 gives us the option to do so,” Chee said.
Chee suggested that with the adoption of distance-based charging, there may be room for a further increase in the COE quota, as this mechanism would provide the LTA with an additional tool for congestion management.
Asked how the injection of COEs aligns with Singapore’s “car-lite” vision, Chee reiterated the government’s commitment to the vision, stating that “having a car-lite vision does not mean that our total car population cannot increase.”
“The key is to avoid road congestion through the use of both ownership controls and usage-based pricing, which is what we have been doing over the last few decades,” he told the House.
