Despite a projected increase in COE supply, deregistration trends and distribution challenges could sustain high prices.
SINGAPORE – The supply of Certificates of Entitlement (COEs) is expected to grow by 17% or more in 2025, driven by a rise in vehicle deregistrations, government measures, and additional allocations. However, experts caution that this may not necessarily translate into lower premiums.
Key Factors Influencing COE Supply
Increased Deregistrations: The exit of older vehicles from the market is anticipated to free up more COEs.
Government Adjustments: Authorities are implementing a cut-and-fill approach to stabilize supply fluctuations.
Additional COEs: An announced injection of 20,000 extra COEs is expected to augment availability, though its full impact in 2025 remains unclear.
Market Uncertainty and Challenges
While the expanded supply suggests potential relief, several uncertainties loom:
Unpredictable Deregistration Trends: Vehicle owners may delay deregistration due to high replacement costs, limiting COE circulation.
Spread of Additional COEs: It is unclear how many of the 20,000 extra COEs will enter the market next year, which could dilute their effect on premiums.
Sustained Demand: Robust demand for both private and commercial vehicles continues to drive competition for COEs, especially in the passenger car category.
Premiums Likely to Stay Elevated
Industry analysts highlight that demand-side pressures and unpredictable market behaviors may keep COE premiums high despite the supply boost. In recent years, premiums have remained elevated due to limited supply and strong consumer appetite for vehicle ownership.
Outlook for 2025
The new passenger car market is projected to grow by at least 17% in 2025, reflecting broader supply recovery. However, whether this translates into more affordable premiums for consumers depends on deregistration rates, market dynamics, and government allocation strategies.
The COE system, long a balancing act between supply and demand, will face another critical test in 2025 as stakeholders navigate these uncertainties.
