Replies to Queries on COE Review

Oral Reply by Minister for Transport Jeffrey Siow

Mr Yip Hon Weng asked the Minister for Transport

a.           what market distortion the proposed COE fee-and-rebate (“feebate”) system is intended to correct;

b.           how the Ministry will assess whether the reform restores meaningful differentiation between mass-market and higher-value cars; and

c.           whether, beyond correcting this distortion, the Ministry will examine how the proportion of mass-market households who can reasonably aspire to car ownership compares with earlier eras.

Ms Jessica Tan Soon Neo asked the Minister for Transport

a.           whether LTA’s COE review will assess affordability impacts on family households and SMEs reliant on cars or commercial vehicles;

b.           how these impacts will be evaluated; and (c) whether the review will consider measures to support those priced out by market driven COE outcomes.

Dr Choo Pei Ling asked the Minister for Transport regarding the proposed changes to the Certificate of Entitlement (COE) system

a.           how will the Ministry prevent the system from disincentivising the adoption of high-performance electric vehicles (EVs) which often carry a higher Open Market Value (OMV); and

b.           how will the Ministry ensure that mass-market car buyers are not financially crowded out by luxury car buyers.

Mr Edward Chia Bing Hui asked the Minister for Transport

a.           whether LTA has assessed setting the proposed fee-and-rebate, or feebate, as a percentage of the COE price instead of fixed amounts; and

b.           what safeguards will ensure that rebates reach buyers and are not absorbed into dealers’ selling prices.

Mr Edward Chia Bing Hui asked the Minister for Transport further to LTA’s consultation paper on COE car categorisation

a.           when will individuals be able to submit initial COE bids online instead of only through ATMs;

b.           whether bid fees for individuals will be reduced or waived; and

c.           whether motor dealers will be required, and not just encouraged, to publish car prices both with and without COE.

Ms Tin Pei Ling asked the Minister for Transport

a.           whether the proposed fee-and-rebate or feebate scheme in the latest LTA public consultation on proposed changes to the COE system will drive up demand for vehicles with originally lower open market value and inadvertently drive up prices of mass market vehicles; and

b.           what further support can large Singaporean families with car needs receive to help mitigate high costs of living.

Mr Victor Lye asked the Minister for Transport in reviewing the COE framework

a.           whether the Ministry will consider requiring all bids to be authorised by verified end-buyers, with dealers permitted to assist administratively but not independently revise bid limits; and

b.           whether it will assess the effects of such arrangements on bidding concentration, price discovery, consumer transparency and COE premiums.

Mr Gabriel Lam asked the Minister for Transport following the proposed merger of Categories A and B and introduction of a fee-and-rebate system as part of LTA’s review of the COE framework, whether the Ministry has modelled the impact of the proposed system on the effective COE cost of mass-market cars, using historical bidding data.

Mr Kenneth Tiong Boon Kiat asked the Minister for Transport

a.           whether the Government will review COE affordability before setting the next vehicle growth rate, as COE prices are not a subject of LTA's review;

b.           what is the current ratio of COE prices to median monthly household income, on the basis that it was 11-to-one in 2013 and nine-to-one in 2023; and

c.           whether this ratio will be published yearly.

Assoc Prof Jamus Jerome Lim asked the Minister for Transport regarding the proposed COE categorisation changes involving rebates and surcharges based on vehicles' open-market values (OMV)

a.           whether the Ministry has studied the expected revenue differences between the three-band and five-band systems; and

b.           whether the rebate and surcharge amounts will be adjusted over time as the median OMVs evolve.

Assoc Prof Jamus Jerome Lim asked the Minister for Transport regarding the proposed COE categorisation changes based on open-market value (OMV) and possible removal of Category E

a.           which COE category will supply quotas for taxis;

b.           whether taxis will continue paying the Category A prevailing quota premium and be subject to the proposed rebates or surcharges; and

c.           whether similar arrangements have been considered for private-hire vehicles.

Mr Gabriel Lam asked the Minister for Transport given LTA’s proposal for Categories A and B COEs to be merged into a single passenger car category, whether the Ministry has assessed the extent to which demand from higher-value car buyers can raise the common COE premium and offset the rebates intended for mass-market car buyers.

Mr Gabriel Lam asked the Minister for Transport what measurable outcomes will the Ministry use to assess whether the proposed merger of Categories A and B COEs and the fee-and-rebate system have achieved their objectives, including in relation to the (i) affordability of mass-market cars and (ii) equitable access to car ownership.

Reply by Minister for Transport Jeffrey Siow:

1.           Mr Speaker, Sir, may I have your permission to take Questions 32 to 37 on today’s Order Paper, as well as related questions filed for subsequent sittings?

2.           The Land Transport Authority concluded its public consultation exercise on COE categorisation yesterday. We are studying the submissions, and have not yet decided on the outcomes. So, I ask for Members’ understanding where I do not yet have an answer to some of your questions today.

3.           But first let me first set the context for the review.

a.           Today, there are 660,000 passenger cars. We have 1.5 million households. Two and a half times the car population.

b.           Roads already occupy more than 12% of our total land area.

c.           We had a recent debate in this House on competing demands for land, including housing and nature areas. We also of course discussed the disamenities of constructing a major road, the North South Corridor.

d.           So Singapore does not have enough land for every household to own a car. In fact, the reality is that we cannot even grow the car population much further.

4.           This is why the Government’s approach has always been to put public transport first.

a.           Not everyone can drive, or wants to drive or to own a car. But everyone can take public transport. In Singapore, we have invested heavily to build up a public transport system that is accessible, reliable and affordable for all.

b.           The Government spends around $6-$7 billion a year on public transport, including subsidies to keep fares affordable.

i.            In comparison, COE revenues have averaged about $5 billion over the past decade annually.

ii.           Put another way, without COE revenues, we would have to find some other way to fund the public transport system that millions of Singaporeans use every day.

5.           But I understand that public transport may not meet every need. A car ride is more convenient when bringing elderly parents to see a doctor, travelling with young children, or returning home after a late-night shift.

a.           Some use taxis, private hire cars or shared cars to meet these needs. The taxi and private hire car population has grown from 28,000 in 2013 to about 70,000 last year to meet these growing demands. These are more affordable options to travel by car, without the expense of owning one.

6.           For those who prefer to own a car, the COE system is a transparent, market-based means of allocating this limited supply of 660,000 cars. The revenues generated then go towards funding public transport for all Singaporeans, and this achieves the greatest good for the greatest number.

7.           So this is the broad context. Every now and then, we have to refine the COE system because of market dynamics or technological change.

a.           15 years ago, Category A and B prices converged because of the increasing prevalence of smaller cars with turbo engines. So we added an engine power criterion, and this worked for quite a few years to separate Category A and B premiums.

b.           Now, Category A and B prices are converging again, because of electric vehicles. Manufacturers and workshops can easily adjust the power output of EVs using software, and so the same car can qualify for different COE categories.

c.           And as a result, Category A premiums have exceeded Category B premiums on a few occasions this year.

d.           Without intervention, this trend will continue as electric vehicles become more popular.

8.           Mr Edward Chia’s feebate scheme, proposed a few months ago, aims to restore a permanent price distinction in COE premiums between mass-market and luxury cars.

9.           LTA consulted the public on the design of this feebate scheme.

a.           The majority of respondents expressed support for such a scheme.

b.           Most people preferred a feebate with five-bands, to reduce cliff effects.

c.           Mr Edward Chia asked if the feebate could be a percentage of the COE price instead of a fixed amount.

i.            This could indeed reduce cliff effects further, but one downside is that buyers would not know the exact rebate or surcharge before the auction begins.

d.           In response to Mr Chia and Mr Victor Lye, some car buyers still prefer to have their motor dealers bid for COEs on their behalf, as a one stop service. So we should not make this too difficult. But we can make it easier for individual buyers who wish to bid for COEs on their own. I’ve asked LTA to review whether to further reduce COE bid fees for individuals, and whether to require motor dealers to publish car prices without COEs.

e.           A separate feebate structure for electric vehicles was also proposed.

i.            But I think this would overcomplicate the system.

ii.           So, to Dr Choo’s question on high-performance electric vehicles, the Government will continue to support electric vehicle adoption separately through the Vehicle Emissions Scheme, rather than via COE policies.

10.        Associate Professor Jamus Lim asked about the treatment of taxis and private-hire vehicles and car-leasing companies under the feebate system. We are still reviewing the treatment of taxis under the proposed feebate system. So, I ask for more time before we come back on this question.

a.           Private hire cars, on the other hand, are private cars with the added flexibility to be used for private hire. So they are not totally like taxis.

b.           We considered creating a separate COE category for private-hire cars. But doing so would restrict the supply of COEs for private-hire cars. And this would raise rentals for private-hire car drivers and drive up fares for commuters, which would be unfair to those who do not own a car or cannot drive.

11.        Ms Tin Pei Ling asked if more can be done for large families with car needs. I recognise that larger families, particularly those with young children, find travelling together by public transport difficult.

a.           But in supporting such families, we must consider not just those who plan to purchase a car, but also those who do not want a car, and who rely on public transport, or taxis, or private hire cars, or shared cars.

b.           We are therefore studying the option of a transport grant for large families, which can be used more generally. And LTA will provide more details  later.

Conclusion

12.        Mr Speaker, I thank Members and the many Singaporeans who have contributed their views on the COE review.

a.           We will study the public feedback carefully and continue to improve the COE system.

b.           I recognise the concerns that Singaporeans have about high COE prices and the cost of owning a car. While we will try our best to refine the COE system for car buyers, my first responsibility is to build a transport system that serves all Singaporeans. So, I ask for everybody’s understanding.

13.        Thank you, Mr Speaker.