Merging Cat A and B, rebates based on car value among proposed changes to COE system

What is a Certificate of Entitlement (COE), and why must someone obtain one to register a car in Singapore?

A Certificate of Entitlement, or COE, is a 10-year entitlement to own and register a vehicle in Singapore. Someone buying a new car must obtain a COE before the vehicle can be registered. This system controls how many vehicles can enter the car population at a time.

Buyers obtain COEs through competitive bidding. The price they pay is called the COE premium. After the 10-year period, a car owner can renew the COE for either five or 10 years, using the prevailing quota premium, or PQP.

The article focuses on changing how car COEs are priced, not removing the entitlement requirement. LTA says there will be no changes to the COE bidding process. Overall premiums will still be determined by demand and the available COE supply, while proposed rebates and surcharges would differentiate mass-market and higher-value cars.

What is LTA proposing by merging COE Categories A and B, and how would the proposed rebate-or-surcharge system work?

LTA proposes merging COE Categories A and B into one car category. The current categories use engine size and power thresholds, but carmakers can adjust specifications so higher-end vehicles fit Category A. That has weakened the intended price difference between mass-market and luxury cars.

The proposed solution is a “feebate” based on a car’s open market value, or OMV, before taxes. Under the three-band option, the lowest-value band receives a $15,000 rebate, the middle band pays the prevailing COE price, and the highest band pays a $15,000 surcharge. A five-band option would use smaller $7,500 adjustments.

LTA says the change is meant to preserve a meaningful price gap, not control overall COE prices. Demand and available supply would continue determining the underlying COE premium. Model bands would be reviewed annually.

How large could the rebates or surcharges be, and roughly how many cars would receive a rebate, pay the standard amount, or face a surcharge?

Under LTA’s three-band proposal, the lowest-value cars would receive a $15,000 rebate and the highest-value cars would pay a $15,000 surcharge. Cars in the middle band would pay the prevailing COE premium without an adjustment. This would separate prices even if all cars bid in one category.

The five-band option would make smaller changes. It would add two intermediate bands, with a $7,500 rebate and a $7,500 surcharge. LTA plans to use median OMV from past data for existing models, or the specific OMV for a new model, to assign each car to a band.

Using 2025 registration figures, LTA estimates that about half of all cars would receive a rebate or pay no extra COE charge. The remaining cars would attract a surcharge. The article does not split that half into separate rebate and standard-price totals.

Why have the prices of Category A and Category B COEs become so similar, and why has Category A sometimes become more expensive?

Category A is intended for mass-market models, while Category B is used for larger, more powerful cars and luxury models. Since late 2024, their premiums have drawn closer together. LTA began reviewing the system after this narrowing gap made the categories less effective at distinguishing vehicle types.

A key reason is that carmakers can adjust specifications for higher-end cars to fit within Category A’s engine-power thresholds. Electric cars are classified using power output alone. When expensive models qualify for Category A, they compete with mass-market cars for the same limited quota.

That competition can push Category A prices sharply upward. Category A exceeded Category B three times between February and June 2026. At the October 7 exercise, Category A closed at $130,001, just $99 below Category B’s $130,100. The proposed merger would address the price distinction through value-based adjustments.

What could the proposed changes mean for buyers of mass-market cars, buyers of luxury cars, and owners renewing their COEs?

Mass-market car buyers could benefit if their models fall into a rebate band. Higher-value and luxury-car buyers could pay more through a surcharge, helping restore a meaningful difference between the two groups. The underlying COE premium would still be set by demand and supply.

For example, models such as the BYD E6, Honda Freed and Toyota Sienta are listed as mass-market examples. Models including the BMW iX2, Honda Civic Type R, Tesla Model Y RWD and Toyota Alphard are listed among those that would incur a surcharge. LTA would publish each model’s adjustment.

Owners renewing COEs may not face the same system. Renewals use the prevailing quota premium, or PQP, and LTA is seeking views on applying the fee adjustments to renewals. It says this may not be necessary because renewal costs are similar for Category A and B cars. Public feedback is open until November 2.

What is the Open Category, or Category E, and why do bidders use it for vehicles such as cars, motorcycles, and commercial vehicles?

Category E, commonly called the Open Category, is a COE category that can be used for different vehicle types. Unlike categories designed around one main vehicle class, it gives bidders flexibility when they are deciding what vehicle to register. This definition comes from established Singapore COE knowledge; the supplied article does not explain it.

Bidders may use Category E for cars, motorcycles and commercial vehicles because an Open Category entitlement can generally be used across those vehicle classes, subject to applicable rules. This can be useful when buyers want more choice or when another category’s quota is unavailable. The article does not provide examples or pricing details for Category E.

The source only states that LTA is reviewing Category E as part of its COE review. It does not state what changes are proposed. Public feedback on LTA’s preliminary proposals is open until November 2.

How do limited COE supply and competition among buyers determine the prevailing COE premium?

Singapore limits the number of new vehicle registrations by making COEs available through a fixed quota. Buyers compete in bidding exercises for those certificates. The prevailing COE premium is therefore shaped by how strongly buyers want vehicles compared with how many COEs are offered.

When demand is high and supply is limited, bidders compete more aggressively, pushing the premium upward. When fewer buyers compete, or more certificates are available relative to demand, bidding pressure can weaken. The exact premium changes from one exercise to another. The article describes this as demand and available COE supply determining overall prices.

LTA’s proposed feebate would not replace that process. Buyers in merged Categories A and B would still face the underlying market-determined COE premium. A rebate or surcharge would then be added according to the car’s OMV, creating different effective costs for mass-market and higher-value models.

Key Facts:

📌 A COE is required to register a car in Singapore.

📌 Car COEs are valid for 10 years.

📌 COE premiums depend on demand and available supply.

📌 LTA proposes merging Categories A and B.

📌 The feebate would use a car’s open market value.

📌 Three bands would apply rebates or surcharges of $15,000.

📌 The three-band option proposes $15,000 rebates or surcharges.