COE system takes a hard look at itself on road to fairness

The Straits Times, COE system takes a hard look at itself on road to fairness

By Research Assistant Professor Samuel Chng, LKYCIC

Technology has rendered current car categories less meaningful, but fairness also depends on how the new rules work and the transport choices people have.

Consider a parent who has to take a young child to childcare, get to work on time and accompany an older relative to a medical appointment that afternoon. Each journey may be manageable on its own. Fitting them together, with room for delays or changed plans, is the challenge.

For this household, a car may offer predictability and control over a demanding day.

Another buyer may value comfort, driving enjoyment or a particular brand. Practical needs and personal aspirations often coexist.

These motivations help explain why discussions about certificates of entitlement (COEs) are discussions about fairness too.

People bring their circumstances to the question of who gets access to a limited resource and what they should pay.

The review of COE categorisation, now open for public consultation, is timely and goes to the heart of the fairness debate.

Singapore’s COE categories have sought to distinguish mass-market cars from high-end vehicles. In 2014, an engine power criterion was added alongside engine capacity to strengthen the distinction.

But fast-evolving technology has made such criteria less effective. The review seeks to restore a clearer distinction between what buyers of lower- and higher-value cars pay.

More than that, the way the COE system regulates car ownership is particularly vital for land-scarce Singapore. Managing demand for road space supports liveability. Land devoted to cars competes with other priorities such as homes, greenery and community spaces.

So how can Singapore keep the system fair while ensuring that COE prices continue to be determined by market forces?

With the distinction between Category A – which was meant for mass-market cars – and Category B – meant for higher-value cars – becoming less meaningful, the Land Transport Authority (LTA) is seeking views on whether the two categories should be merged into a common passenger-car category.

Currently, Cat A covers cars with engines of up to 1,600cc and power output of up to 97kW (110kW for fully electric cars); Cat B covers the rest.

Technological advances mean that manufacturers can adjust power specifications to fit Cat A thresholds and many premium models sit alongside modest ones in Cat A, paying the same COE premium.

To address this, LTA proposes a fee-and-rebate (“feebate”) system based on each model’s median open market value (OMV), which reflects a vehicle’s assessed import value.

Under this system, cars in the middle of the value band would neither get a rebate nor pay a surcharge.

Mass-market cars would be placed in a lower-value band and qualify for a rebate, while those in the higher value bands would attract a surcharge.

Simply put, buyers of cars in higher-value bands would pay more for their COE than those in lower-value brands. That is a worthwhile improvement.

But its contribution to fairness needs to be understood precisely because the perception of what is fair can vary – depending on each person’s circumstances.

The different meanings of fairness
For some buyers, fairness means similar cars should receive similar treatment.

Others ask why a household with substantial caregiving responsibilities or greater transport needs cannot receive priority.

There are other complications too.

A lower-value car does not necessarily belong to a lower-income household. A more expensive vehicle may have been chosen for accessibility or caregiving reasons.

Differentiating cars by value therefore does not settle how best to support households with different transport needs.

The proposed merger also involves a trade-off.

Some buyers may regard Cat A as protection from competition with premium car buyers.

Removing that boundary could create unease.

Yet the presence of premium models in Cat A has already weakened that perceived protection.

The proposal would replace the separate quota with an explicit difference in payment. It would not reserve COEs for buyers of lower-value cars.

Nor would merging the categories create more COEs. Demand and the available quota would continue to influence the auction premium. So a rebate against a future common premium does not guarantee that buyers will pay less than they do today.

One needs to understand both, the benefit a reform aims to deliver and the problems it leaves unresolved. One can support the review while scrutinising its design.

Fairness also lies in how the rules work
How the adjustments are implemented will shape whether buyers experience the new arrangement as reasonable and fair.

Should cars be split into three bands, with a rebate for the lowest and a surcharge for the highest?

Under the illustrative three-band structure, cars in the lowest band receive a rebate of $15,000, while those in the highest band attract a $15,000 surcharge. There is no adjustment for those in the middle. Under the five-band structure, each adjacent band would differ by $7,500.

The sharp steps under the three-band structure would mean that two roughly comparable models receive substantially different treatment, depending on which band they fall into. Buyers may find that arbitrary or allow rebate eligibility to dominate their choice.

Smaller steps could make the treatment of similar models feel more proportionate. Five bands need not make decisions substantially harder if buyers can easily check a model’s band and understand the final amount payable.

Simplicity should be judged by how easily people can use a system, not just by the number of categories it contains.

Annual band reviews and transition arrangements matter for the same reason.

People plan purchases and COE renewals around budgets, work and family responsibilities. They need clear notice of changes, certainty about which rules apply and clear price breakdowns so they can compare the actual amounts payable.

The consultation offers an opportunity to test understanding. Can buyers explain what a rebate means, compare models across bands and recognise that the quota remains limited?

Their answers would reveal where the design or explanation needs improvement. Rules that people can confidently navigate are another dimension of transport innovation.

A wider promise of mobility
The COE review should be seen as part of improving Singapore’s transport system as a whole.

Requests to allocate COEs according to family needs illustrate why this matters.

Such an allocation would require difficult judgments. Household size alone cannot capture disability, caregiving, work schedules or access to other transport. Needs can also change over a 10-year COE period.

The difficulty of creating fair eligibility rules does not diminish the experiences behind those requests. They tell us where daily mobility feels exhausting, uncertain or hard to coordinate.

That is why it is vital that, alongside managing car ownership, we ensure that alternatives remain accessible, affordable, reliable and convenient. Public transport, complemented by walking, cycling and shared transport, should be the most attractive and practical choice for as many everyday journeys as possible.

That requires attention to the entire journey. A short train ride may still be difficult if reaching the station involves an exposed walk, needs several transfers, or requires more effort due to travelling with a stroller or someone with limited mobility.

For the parent juggling childcare, work and an older relative’s appointment, the question is whether the whole day can be managed with confidence.

The ongoing Land Transport Master Plan refresh and its consultations provide an opportunity to bring these experiences into wider planning. Accounts of difficult transfers and unpredictable journeys can identify improvements that matter to households.

Singapore has never been afraid to confront difficult questions about ownership, road use and space scarcity, then develop tools to address them.

Those tools need to be refined as vehicles and technology change and people’s expectations evolve. This review can make the treatment of different cars more coherent. The yardstick for its success remains enabling people to reach their destinations affordably, reliably and with confidence – whether or not they own a car.

• Samuel Chng is a research assistant professor at the Lee Kuan Yew Centre for Innovative Cities, Singapore University of Technology and Design, where he heads the Urban Psychology Lab.