At the height of an earlier boom, Cat B peaked at $92,100 in January 2013 before falling to $23,568 by December 2018. But that relief did not come from the government deciding that car ownership needed to become more affordable.
The 2013-2018 decline happened because a wave of COEs issued during an earlier boom hit their 10-year expiry and returned to the pool, inflating supply under rules the government had already set, not because anyone chose to loosen those rules to bring prices down.
COE supply is a government formula, tied to deregistrations and a permitted population growth rate. The Land Transport Authority (LTA) has never lacked control over it. It has simply used that control sparingly, never enough to bring prices down decisively.
A written parliamentary question on May 6 asked why COE premiums kept climbing despite LTA’s so-called cut-and-fill supply mechanism introduced in 2023. That’s a tool that lets LTA shift quota numbers between vehicle categories to ease pressure on whichever one is running hottest, without changing the total number of COEs issued.
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No cooling measures
Acting Transport Minister Jeffrey Siow gave an answer notable for what it did not promise: prices boil down to supply and demand. There was no pledge to cool the market, let alone any acknowledgement that runaway COE prices needed fixing. Put simply, a high price is not a flaw but just the quota auction doing exactly what it was designed to do: ration scarce road space.
Two months earlier, in March, several lawmakers pointed out in parliament that Cat A and B premiums had converged, blurring the line the categories were meant to preserve. Siow responded by saying LTA would review how cars are categorised. The review is due by the end of the year.
Some members of parliament had pushed for more last year. Their proposals included spreading COE supply more evenly and allocating more to groups like young families and the elderly. Those ideas got a hearing in parliament but little else. The key issue, as far as the government was concerned, was not affordability but congestion management.
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That does not mean the affordability issue cannot be challenged. The obvious pushback is that COEs were never meant to be affordable in the first place, so comparing them to housing or healthcare, which the government actively seeks to keep affordable, is not really a fair comparison.
That holds up for a car bought purely for leisure. It holds up less well for private-hire vehicles (PHVs), which compete in the same quota pool. PHVs’ share of successful bids fell from about 26% in 2022 to roughly 10% by late 2024, as individual buyers accounted for more of the recent price increases. Even so, the COE cost embedded in PHVs is still a direct input into what a Grab ride costs a commuter. A premium north of $120,000 is not just costly for car buyers. It works its way into the budgets of households that never bought a car at all.
The case gets even weaker with businesses. Cat C, covering goods vehicles and buses, closed at an all-time high $95,000 in the latest tender. Delivery fleets, school buses, and small and medium enterprises make up this category. Every added dollar ends up in freight rates and delivery fees borne by households, whether they realise it or not. A price billed as congestion management is, in effect, a direct tax on doing business, and one that’s passed through to consumers.
Satellite alternative
The government has an alternative sitting in its own roadmap: ERP 2.0. Satellite-based and gantry-free, it currently just replicates the existing charging model. True distance-based pricing is available whenever LTA chooses to activate it.
Some MPs have asked whether that eventual shift to distance-based pricing might justify easing COE quotas. Then-transport minister Chee Hong Tat said in 2024 that the government was keeping the two separate: COE quota injections were not linked to that decision. If distance-based charging is eventually switched on and takes over congestion management, the case for COE quotas as a pure congestion tool weakens.
Healthcare sharpens the comparison. Medical costs are shaped by forces the government doesn’t fully control. These include an ageing population, prices of imported drugs, and private specialist fees. Yet Singapore built a network of cost-support schemes to keep them bearable, including Medisave and MediShield Life.
Part of the explanation is likely fiscal, even if the government has never said so outright. Every dollar of COE premium is collected as state revenue. A resale flat trading above valuation earns the state a modest stamp duty bump, nowhere near what it collects from a COE premium. And subsidising a MediShield premium is a direct government expense, not a windfall.
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Cooling COE prices would mean giving up government revenue. That leaves revenue as the more durable explanation for keeping the COE system as it is.
LTA has said COE premiums fund public transport and subsidies that benefit Singaporeans broadly. Spending the money well does not settle the affordability issue. This is not an argument that the COE system is broken, or that $130,000 is indefensible on its own terms. Singapore keeps traffic congestion in check better than most cities of similar density, including Bangkok, London and New York.
But the government should stop citing supply and demand as an explanation that settles the affordability issue, when supply is a lever it controls and has chosen, time and again, not to pull harder. A country that moves fast on flats, inflation and healthcare, but only reluctantly on car ownership, has made a choice about whose price pain counts as an emergency. Car ownership, evidently, does not.
