The Euro IV diesel emissions standard has caused another unexpected blip in the vehicle market - a crash in the commercial vehicle certificate of entitlement (COE) premium in the last three tenders. This may have a significant impact on the effort to clean up the air in Singapore.

The stage was set several months ago, before Euro IV came into effect on Oct 1 last year. Realising that vehicles that meet the strict emissions standard could cost up to 30per cent more than Euro II models, consumers rushed to buy Euro II vehicles in the months leading up to October.

And because some dealers knew their Euro IV-compliant models would not be available until well after October, they stocked up on Euro II vehicles, hoping to sell them before the deadline.

The buying frenzy that ensued drove the commercial vehicle COE premium to as high as $15,201 in September, nearly three times the price at the beginning of the year.

When October came around, the frenzy dissipated. The COE price fell to $2,001 in October?s second tender, $1,003 in November and $509 last month.

It then plummeted to $1.

This is not necessarily good news. While it may benefit buyers without vehicles that are close to expiry, those with fairly new fleets, including those who bought just before the crash, will incur a sharp drop in resale values.

Motor traders expect the $1 price to remain in upcoming tenders. "We warned that this would happen," said Motor Traders Association president Chia Yong Sian.

The industry reckons the freak results might prompt some vehicle owners to extend the lifespan of their fleets instead of replacing them, since there is no rule against renewing the COE for non-Euro IV vehicles by another 10 years.

Landscape contractor Ng Hai Thong, who has a fleet of pickup trucks between four and eight years old, is already planning to do so.

"It's much cheaper than buying new trucks," Mr Ng said.

The current fee for renewing a truck COE - based on a three-month moving average of commercial vehicle COEs - has already plunged to $864. That's from an average of $8,200 last year. And it could fall further.

This renewal fee compares with a purchase price of around $40,000 for a brand new 10-foot truck, the most popular kind here.

If large numbers of owners renew their old fleet, combined with the number of people who bought new vehicles before the October deadline, the conversion of Singapore's diesel vehicles to Euro IV will be significantly slowed.

It will also mean that potentially thousands of Euro II and Euro I vehicles will remain on the road for 10 or more years.

Meanwhile, motor dealers and used-vehicle agents who registered non-Euro IV Japanese commercial vehicles in recent months are now reselling them.

Speculators might renew large numbers of old vans because of the low renewal fee. They will resell them later at a profit when COE prices head north. This happened in the past with cars, when COE prices plunged.

The demand for non-Euro IV vehicles is high not only because they cost less, but also because they incur lower operating costs.

And because they are lighter than Euro IV models, they can be parked at HDB carparks for $90 a month, whereas it will cost $190 for many Euro IV models.

If the commercial vehicle COE premium had not crashed, the renewal fee would not have dropped, and the urge to renew old vehicles would not have been so strong. Hence the movement towards cleaner air in Singapore might have taken place faster.