Proposed COE merger: Majority back 'feebate' scheme, most favour five-band system

SINGAPORE: A proposed scheme to introduce rebates and surcharges on Certificate Of Entitlement (COE) premiums has received majority support in a public consultation, with most respondents favouring a five-band system to distinguish between mass-market and luxury cars.Transport Minister Jeffrey Siow said in parliament on Tuesday (Nov 3) that the Land Transport Authority (LTA) was still studying the submissions after the consultation closed on Monday and had not decided on the final changes."The majority of respondents expressed support for such a scheme. Most people preferred a 'feebate' with five-bands, to reduce cliff effects," said Mr Siow.Several Members of Parliament (MPs) had asked about proposed changes to the Certificate of Entitlement (COE) system, including whether they would keep mass-market cars within reach, affect electric vehicle (EV) adoption and result in higher prices for cheaper cars.In response, Mr Siow said that the proposed fee-and-rebate, or "feebate", system was intended to restore a "permanent price distinction in COE premiums between mass-market and luxury cars", after the gap between Category A and B COE premiums narrowed with EVs' growing popularity.Manufacturers and workshops can adjust the power output of EVs using software, allowing the same car to qualify for different COE categories, he said. As a result, Category A premiums have exceeded Category B premiums on several occasions this year."This trend will continue as electric vehicles become more popular," he added.Under the LTA's proposal, the existing Category A and B COEs would be merged into a single category for cars.Categories A and B currently divide cars broadly according to engine capacity and power, with Category A traditionally covering smaller and less powerful models.LTA has said advances in vehicle technology, particularly EVs, have made these criteria less effective. Manufacturers have increasingly been able to adjust vehicle specifications to fit within Category A limits, resulting in more buyers competing for Category A COEs and a narrowing price gap with Category B.To continue distinguishing between mass-market and higher-value cars, LTA proposed introducing a feebate system based on a car model's open market value (OMV).A car in a lower-value band would receive a rebate on its COE price, while higher-value models would face a surcharge. Depending on how the bands are structured, the difference between the highest surcharge and largest rebate could be as much as S$30,000.LTA has proposed either a three-band or five-band system, with the largest rebate and surcharge set at S$15,000 in both options.The agency said the aim is to better distinguish between mass-market and higher-value cars while allowing COE premiums themselves to continue to be determined by market forces.LTA has said it expects to complete its review by the end of the year and publish its findings and recommendations in the first half of 2027.FIVE BANDS PREFERREDMP Edward Chia Bing Hui (PAP-Holland-Bukit Timah), who had earlier proposed the feebate system, asked whether the rebate and surcharge could be set as a percentage of the COE price instead of as fixed amounts.Mr Siow said this could reduce the "cliff effects" between bands further, but would also mean buyers would not know the exact rebate or surcharge before the COE bidding exercise begins.LTA will also study whether to further reduce COE bidding fees for individuals and whether motor dealers should be required to publish car prices without COE.Some buyers still prefer dealers to bid for COEs on their behalf as a one-stop service, Mr Siow said, adding that the government should not make this more difficult."But we can make it easier for individual buyers to bid for COEs on their own," he said.LTA is also still reviewing how taxis would be treated under the proposed feebate system, Mr Siow said.EV SUPPORT TO REMAIN SEPARATEMP Choo Pei Ling (PAP-Chua Chu Kang) asked how the proposed system would avoid discouraging the adoption of high-performance EVs, which can have higher OMVs, and ensure mass-market buyers were not crowded out by luxury car buyers.Mr Siow said a separate feebate structure for EVs had been proposed, but this would make the system too complicated.The government will instead continue to support EV adoption separately through the Vehicle Emissions Scheme rather than through COE policies, he said.SUPPORT FOR FAMILIESMP Tin Pei Ling (PAP-MacPherson) asked whether the proposed feebate could increase demand for lower-value vehicles and inadvertently push up prices of mass-market cars.She also asked what more could be done to help large families that need a car.Mr Siow said he recognised that larger families, particularly those with young children, may find it difficult to travel together on public transport.But any support would also have to consider families that do not intend to buy a car and instead rely on public transport, taxis, private-hire cars or car-sharing services, he said.The government is studying the option of a transport grant, with more details to be provided later.