Boston, MA -- (SBWIRE) -- 08/20/2012 -- A decline in the premiums paid during the latest round of bidding for certificates of entitlement (COEs) to buy vehicles has prompted a slight upward revision in BMI's sales forecast for passenger cars. Although we still expect both categories (below and above 1,600cc) to end 2012 down on previous years, we believe the contraction will not be as pronounced as previously forecast as prices fall and measures are sought to better manage COE supplies.

Car sales in the smaller segment (excluding taxis) have already risen 12% y-o-y in the first four months of 2012 and we would expect the lower prices to encourage some buyers to take advantage rather than holding off. The segment is also benefitting from more COEs being made available for the February-July bidding period. Taxi sales were still down 29% y-o-y in 4M12, however, which means we expect the total segment of cars below 1,600cc plus taxis to end the year down 8%, rather than the previous 20% contraction.

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Sales in the commercial vehicle segment are showing the effects of a cut in the number of COEs available, with sales for 4M12 down 16% y-o-y. This follows a 33% cut in the quota of COEs for the segment, which we believe was related to the trend for consumers to switch to vans for personal use to avoid the higher COE premiums for cars.

Echoing BMI's view that the natural growth pattern of Singapore's new vehicle market is being distorted by the reduction in available COEs, the Motor Traders Association of Singapore (MTA) submitted a paper to the Ministry of Transport in November 2011 highlighting its own concerns about COEs. The MTA believes the current system, which determines the number of COEs available based on de-registrations from the existing fleet, creates peaks and troughs in the market. This is reflected in BMI's forecast, which does not envisage a return to positive growth until 2013, when a new wave of replacement purchases is expected.

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