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Response by Senior Parliamentary Secretary for Transport Baey Yam Keng to Mr Muhammad Faisal bin Abdul Manap's Adjournment Motion on Motorcycle Ownership

05 Oct 2021 In Parliament

1.     Mr Deputy Speaker, Sir, the high motorcycle Certificate of Entitlement (COE) prices since bidding resumed in July 2020 have considerably led to concerns by several Members of this House. Besides Mr Faisal, various members including Mr Chong Kee Hiong, Mr Sitoh Yih Pin, Ms Joan Pereira and Mr Abdul Samad have raised similar concerns and offered various suggestions. We have also heard similar feedback from members of the public and the industry, and have responded both in this House and through the media. 

2.     In land scarce Singapore, unfortunately, we do not have the luxury of letting everyone own private vehicles, be it cars or motorcycles. The COE system is a market-based mechanism that allows us to allocate limited resources efficiently. While it is not a perfect solution, the system has generally worked, and COE prices fluctuate based on supply and demand, as should be the case.

3.     That said, we are mindful that motorcycle owners could have different needs from owners of other vehicle types. This is why there is a separate Category D for motorcycle buyers so that they need not compete with commercial vehicle and private car owners. Unlike the other categories, Category D COEs do not contribute to Category E COEs, or the Open Category, which means that the quota of COEs is determined largely by the number of de-registered COEs in the preceding quarter. 

4.     The high prices observed for motorcycle COEs of late indicate strong demand. It would indeed be a cause for concern if the COE prices are propped up because dealers are bidding for more COEs than they need and are not using them. However, we have observed very high utilisation rates over the past year, which suggests that the higher premiums are a result of higher demand. Let me explain. Successful bidders of Category D COEs are issued Temporary COEs (TCOEs), which need to be used to register motorcycles. These TCOEs will expire if they are not used by the bidders to purchase and register motorcycles within the six-month validity period, and the bid deposits will be forfeited. Since COE bidding resumed in July 2020, the proportion of utilised TCOEs has been high at approximately 99%, as compared to the historical average of about 91%. This remains the case even for the TCOEs that just expired at the end of September 2021, where the utilisation rate was 99.7%. These were the COEs that were secured in March 2021. We will continue to closely monitor the utilisation rates of the TCOEs issued in recent months over their respective six-month validity period.

5.     Mr Deputy Speaker, the COE supply from July 2020 to July 2021 was also 30% higher. This was because we returned the additional COE quota accumulated when bidding was suspended during Circuit Breaker from April to June 2020, together with the closure of vehicle showrooms. This return of the additional quota was completed with the second bidding exercise in July 2021. So for the current August to October 2021 period, the COE supply is 28% lower than the preceding quarter – the May to July 2021 period – with the supply being predominantly determined by deregistration. This combination of increased demand and the lower COE supply would likely have contributed to the higher premiums in the bidding exercises since August, but has receded somewhat in the most recent bidding exercise. 

6.     Sir, any adjustment to the COE system will have knock-on effects, and potentially unintended consequences on the consumer. Hence, it is important to assess whether the market-based COE system is working as intended, or if there is some market failure. So let me address Mr Faisal’s suggestions in turn.

7.     First, Mr Faisal suggested splitting the motorcycle COEs into sub-categories according to vehicle classes in the same manner as riding or driving licenses, as well as allocate the COE supply for each category according to the percentage of these vehicles on our roads. This is not new – former MP Mr Zainal Sapari had in 2015 suggested this, as well as Mr Abdul Samad who just filed a question in this sitting. Ms Joan Pereira had also spoken about separate quotas for motorcycles based on a different categorisation. Mr Chong Kee Hiong also asked to create a new category of COEs for motorcycles used for delivery work. We have explained the considerations in the past and these considerations remain relevant today. Let me reiterate. Unlike cars, the quota for motorcycle COEs is relatively small. For example, for August to October 2021, about 440 Category D COEs were available in each bidding exercise. If we were to divide this further, there will be even smaller quotas for each sub-category. This will likely result in greater volatility and potential increases in COE prices. Of note, allocating sub-category quota based on the prevailing split in motorcycle population has its challenges. The percentage of Class 2B motorcycles registered fluctuates across the years and even from month to month. It would therefore be very difficult for us to arbitrarily select an allocation basis.

8.     Second, Mr Faisal also suggested abolishing COEs for all Class 2B motorcycles and to replace it with a balloting system. I understand that the intent is to make COEs affordable for those who need a motorcycle for livelihoods, but this is not necessarily better. Such a two-tiered COE system is not equitable, since other types of vehicles such as cars and commercial vehicles can also be used for livelihoods. More importantly, such a system requires us to arbitrarily set a price. If the price is too low, it will increase demand and crowd out those who truly need the motorcycle for a living, and are prepared to pay a bit more for the value it brings.

9.     Third, on allowing motorcycle buyers to bid for COEs under their own name. This is already allowed as individuals can bid for COEs through the ATMs. However, many motorcycle buyers still choose to go through dealers, as this will allow them to get their motorcycles immediately, using TCOEs that the dealer has already secured. A removal of this option could have unintended consequences for buyers and will have to be studied carefully.

10.    Fourth, the five-years COE renewal option is something we created for vehicle owners who need their vehicles for only five years instead of 10 years. If we were to allow COEs to be renewed for five years repeatedly, there will be fewer COEs recycled for bidding. This will tilt the current balance between existing and prospective vehicle owners.

11.    Fifth, on establishing Preferential Additional Registration Fee (PARF) rebates for motorcycles. Such suggestions to extend the PARF scheme for cars to other vehicles have been raised in this House before. The PARF system is intended to encourage early turnover of older vehicles, and to keep our car population relatively young. PARF needs to be taken in totality with the significantly higher ARF on cars; motorcycles pay significantly lower ARF with a base rate of 15% of the vehicles’ Open Market Value (OMV) compared to 100% for cars. We do not have plans to extend the PARF scheme to other vehicle types. We have already kept related costs for motorcycles lower. The six-monthly road tax amount is $31 for Class 2B motorcycles, as compared to $156 for cars of engine capacity less than 600cc. ERP rates for motorcycles are also generally half that for cars.

12.    Last but not least, on the issue of parking. The parking provisions depend on the nature of the development and the geographical zone, including whether it is near public transport. We acknowledge that the food delivery sector has grown rapidly in recent years, and that commercial developments have their own circumstances and needs as well. Commercial building owners are strongly encouraged to set aside motorcycle parking lots for food delivery riders, and to provide a reasonable parking grace period for them.

13.    Sir Deputy Speaker, we understand the concerns of the impact on motorcycle owners who ride for a living, and are mindful of the needs of motorcycle owners. I would like to assure the House that we are monitoring this situation closely, and will take action if warranted. Thank you.