By CHRISTOPHER TAN

CERTIFICATE of entitlement (COE) prices continued to climb as bidders scrambled for the permits ahead of a probable cut in quota this year.

COE premiums for cars up to 1,600cc rose by 1.8 per cent to $20,340 at yesterday's tender. COE for cars above 1,600cc was 3.1 per cent higher at $23,889. They were surpassed by the premium for Open COE, which can be used for any vehicle. This rose by 8.2 per cent to close at $24,229.

Commercial vehicle buyers have to bear a higher premium than those buying a 1,600cc vehicle. Their COE price increased by 9.9 per cent to $23,501. Bikers will feel the pinch as well. The COE price for motorcycles shot up by 17.5 per cent to $1,001.

Industry players are bracing themselves for premiums to rise further. Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, pointed to vehicle tax revenue projections revealed in Monday's Budget as a sign.

The Budget projected that vehicle-related tax revenue will dip by 16.5 per cent to $1.5 billion in the 2010 financial year, from $1.8 billion last year. But at the same time, COE revenue is projected to rise by nearly 50 per cent to $900 million, from $610 million last year. According to Mr Lim, the market read this as a clear indication that there will be fewer cars (on the back of fewer COEs), and COE premiums will soar.

Last year's average COE premium for cars up to 1,600cc was $15,000, while the average COE price for cars above 1,600cc was $16,400. Based on the projected rise in COE revenue, the two averages will be close to $22,500 and $24,600 respectively this year.

Motor Traders Association president Tan Kheng Hwee predicted COE premiums will hit $30,000 to $35,000 'by year-end if the economy continues to grow'. 'Although COE supply will be reduced sharply, new car demand is still moderate,' she said, as most cars here are relatively young. But as these cars age, '$50,000 to $60,000 is not out of the question in a couple of years' time'.

Mr Neo Nam Heng, president of the Automotive Importers and Exporters Association, concurred, saying: 'I think prices will breach $30,000 in three months' time.'

He said yesterday's increase was also fuelled by a weaker euro, which has been hit by fears of spreading credit defaults in countries such as Portugal, Spain and Greece. He said: 'The weak euro benefits the European makes, which in the first place have bigger profit margins to bid for COEs.'

Recent sales performances of key European marques seem to support his observations. Last month, Volkswagen registered a record 393 cars sold in one month.

Motor traders said the sharp rise in Open COE premiums may also be a sign that speculators are back. Open COEs are transferable, and speculators secure these COEs to resell them to motor traders who may have failed to clinch some COEs.

A fast-rising Open category indicates that speculators are bullish about future premiums.

This article was first published in The Straits Times.

For more The Straits Times stories, click here.