New Transportation research report from Business Monitor International is now available from Fast Market Research

Boston, MA -- (SBWire) -- 12/31/2013 --The COE system has been refined to take into account feedback from the recent public consultation exercise, during which BMI too gave its own take on the possible tweaks, which could be administered to an imperfect system (see 'COE: Possible Solutions To Tweak An Imperfect System', July 23). The revision now sees Category A having an additional criterion (besides having an engine of 1,600cc and below), the engine power must also not exceed 97kW. If a car's engine is smaller than or equal to 1,600cc but its power exceeds 97kW, it will fall under Category B in the new system.

Through this move, the government hopes to drive down Category A COE prices in the long term as demand from the premium segment is removed. With this change being formally implemented in February 2014, to give time for the industry to adapt, we believe this regulatory development will have certain implications for the market.

- Luxury And Mass Market Segment Fortunes Could Reverse In 2014
- Category B COE Prices Will Increase
- Fuel-Efficiency May Be Compromised

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COE Price Outlook

COE prices were down across all categories in November 2013 (1st bidding) versus October 2013 (2nd bidding). However, Category B prices remain elevated when compared to the period before September 2013 when the additional COE criterion) came in. This is because buyers who intend to buy cars that fall under Category B are jumping into the market now in anticipation of Category B COE prices rising after February 2014 due to the re-classification of engine power bringing additional demand from Category A over to Category B.

Sales Forecast

Over the 2013-2017 period, we forecast passenger car sales growth rates to remain lacklustre for the next two years before picking up in 2015 as a slew of COEs get de-registered, which will free-up additional supply in the market.

A healthy pipeline of infrastructure projects, will support CV sales in the coming years and similar to cars, sales of CVs will pick up in 2017, as more owners, which are facing expired COEs, come back into the market.

Motorbike sales are on track to hit our bullish 2013 sales growth forecast of 11.0%, to 11,015 units, with 10M13 sales coming in at 9,655 units. Motorbike sales have enjoyed a resurgence in the past few years at the expense of declining car sales. While small car COE prices have soared from 2010-2013 and crossed SGD90,000 (US$72,500), motorbike COE prices are still at an affordable SGD$1,710 (US$1,380). Also, with lower maintenances costs for a motorbike compared with a car in all aspects - from the insurance, to the road tax, to the fuel consumption - it is not hard to see why consumers who are considering a car purchase might decide to own a bike instead.

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