Dealers rev up for COE boom
MORE certificates of entitlement (COEs) are expected next year - possibly 50 to 75 per cent more - and car distributors are gearing up their operations for this boom.
With a maximum of about 52,000 cars which can be deregistered between now and the middle of next year, dealers are preparing for a big spike in COE supply.
Deregistrations are the main component in determining each new COE quota. Over the past four years, the number of cars scrapped has been low.
This, and a lower allowable vehicle growth rate and COE clawbacks due to previous oversupply, have put a squeeze on COEs.
As a result, the number of private passenger cars registered last year was just 22,008 units, while only 27,000-plus new cars were put on the roads in each of the preceding two years.
"Compared with those lean years, the next year will have at least 50 per cent more car COEs, if not 75 per cent more," said the director of a volume dealership.
The situation looks even rosier beyond that. According to the Land Transport Authority, from the middle of next year to the middle of 2016, a maximum of 107,000 cars are due for deregistration, or double the preceding period's figure. And this pool will remain about the same size for the following 12-month period from the middle of 2016 to the middle of 2017.
So, it is no surprise that many distributors are ramping up operations. The Mitsubishi brand, for example, is returning to Cycle & Carriage's Alexandra Road showroom.
In 2010, Mitsubishi shrank its operations in line with the contracting market. To cut costs, it moved a showroom run by its dealer in Ubi.
But this week, it re-opened its main showroom in the prime motor belt.
Others may be more cautious about overextending themselves. Over at Borneo Motors Singapore, the authorised Toyota distributor is said to be streamlining its pre-delivery inspection (PDI) operations and securing new facilities to handle the expected rise in sales. Distributors require such inspection facilities to prepare new cars for delivery.
A critical issue amid the coming COE boom is manpower, especially trained sales staff, said a director of a luxury dealership.
"In the past three years, many sales people left the industry or were retrenched because of falling sales," he said. "The attrition rate was at least 30 to 40 per cent for the major dealerships."
Distributors also cut down on sub-contract work for everything from accessories to vehicle logistics.
The director said: "Many of these sub-contractors have either scaled down tremendously or gone bust. Whether we can get back all these when we need them fast will be key."
THE BUSINESS TIMES