Proposed COE changes could better separate luxury, mass-market models but may not lower prices

The common premium would still be set by the marginal buyer, Assoc Prof Theseira said. If that buyer is shopping for a higher-end car or can pay more, the premium could be closer to what Category B buyers are willing to pay today.

Some buyers may also put part of their savings from a rebate back into their COE bids to improve their chances, he said.

“At the end of the day, this policy can deliver you the price difference between mass-market and luxury cars, but it cannot deliver you lower COE prices,” he said.

Whether rebates push premiums up would depend on how buyers respond, said Asst Prof Chng. 

If existing buyers simply switch to lower-OMV models, the number of bidders would not necessarily rise. But if rebates attract additional buyers or give existing ones more room to bid, a higher common premium could offset some of the benefit, he said.

Unlike Category A today, lower-OMV cars would not have their own COE pool, so greater demand for them would feed into the same common premium, Asst Prof Chng said. 

Some Category A buyers may still feel they have lost a degree of protection from higher-value buyers, although premium models in Category A have already weakened that perception, he added.

Assoc Prof Ong also flagged a possible rush to buy cars before the new bands take effect, as buyers weigh the certainty of the existing system against the unknowns of the new one. 

He said COE prices should be watched ahead of implementation, although longer-term trends would still be driven by supply and demand.