Rising COE Costs Are Impacting Car Affordability and Dealer Profit Margins
The ongoing record-high prices for Certificate of Entitlement (COE) are squeezing the affordability of mass-market vehicles in Singapore. As COE premiums continue to rise, even the smallest and most affordable car models are becoming out of reach for many consumers. Coupled with upcoming regulatory changes from the Land Transport Authority (LTA) on vehicle emissions and the reduction of rebates under the Vehicle Emissions Scheme (VES), car dealers face an increasingly difficult market.
At the recent Car Expo held on October 14-15, 2023, some dealers offered significant discounts—up to 15% off the original retail prices—to move their stock before the regulatory changes take effect. Despite these aggressive markdowns, experts project that car prices will rise by at least S$10,000 in 2024, largely driven by higher COE costs and stricter emission regulations.
Some cars are being sold with razor-thin profit margins, and dealers may even be operating at a loss once overhead costs are considered. Smaller cars, in particular, are reported to yield minimal or negative net margins after accounting for factors like storage, inspection, and cleaning of the vehicles.
Here are five popular Category A COE models sold at the recent Car Expo, along with their basic costs and gross margins:
Citroen C4 Feel
Advertised Price: S$143,999
Gross Margin: S$5,262 to S$7,262 (depending on COE bidding round)
Kia Cerato SX
Advertised Price: S$148,999
Gross Margin: S$12,994 to S$14,994
Mazda 3 1.5 Classic
Advertised Price: S$146,999
Gross Margin: S$15,643 to S$17,643
Suzuki Swift 1.2
Advertised Price: S$136,888
Gross Margin: S$8,904 to S$10,904
Peugeot 3008 1.2 eat8 Active Premium
Advertised Price: S$173,000
Gross Margin: S$6,953 to S$8,953
Despite these margins, dealers are feeling the squeeze, as they are often forced to offer these cars at near-zero or negative profit, relying on after-sales services and parts sales to offset the losses from new car sales.
