The Land Transport Authority (LTA) has unveiled preliminary proposals to revise Singapore’s Certificate of Entitlement (COE) system for passenger cars, aiming to better distinguish between mass-market and premium vehicles amid rising COE prices and evolving market trends. The consultation exercise commenced on October 8 and will close on November 2, with the review expected to conclude by mid-2027.
Currently, the COE system divides passenger cars into two categories: Category A for smaller, mass-market vehicles, and Category B for larger, higher-end models. However, the distinction has blurred in recent years, partly due to carmakers adjusting specifications—including for electric vehicles—to fit within Category A thresholds. As a result, Category A premiums, which are bid prices for the right to own a vehicle for 10 years, have risen sharply, sometimes surpassing Category B premiums. For example, at a recent tender in October 2026, the Category A premium reached $130,001, just $99 less than Category B’s $130,100, narrowing a gap that was over $15,000 in 2022.
To address this, the LTA proposes merging Categories A and B into a single passenger car category while introducing a tiered system of rebates and surcharges based on a vehicle’s open market value (OMV)—the declared price of a car before taxes and duties. Two options are under consideration: a three-band structure with rebates or surcharges of $15,000 for the lowest and highest value bands respectively, and a five-band structure allowing smaller adjustments of $7,500 to $15,000. Cars in the middle bands would pay the full COE premium without adjustment.
The LTA recommends using the median OMV of each model derived from past registration data to assign bandings, noting that OMV fluctuates due to exchange rates and supply chain factors. The authority plans to publish band assignments annually to provide transparency for buyers. Imported used cars will be excluded from calculations. The review does not propose changes to the COE bidding process, vehicle taxes, or other fees.
Transportation experts indicate that while the reform seeks to clarify the pricing distinction between mass-market and luxury vehicles, its effect on overall COE prices remains uncertain. Merging categories does not increase the number of COEs available, and the LTA maintains that COE prices will continue to be shaped by market demand and certificate supply. Some analysts suggest that the tiered adjustment may encourage buyers to shift towards lower-OMV models to benefit from rebates, increasing competition in the mass-market segment and potentially exerting upward pressure on COE prices.
Market watchers also anticipate that carmakers will adjust their models to fit desirable bands, complicating efforts to maintain clear distinctions. The LTA has said it will monitor for potential gaming, with enforcement coordinated through agencies like the Competition and Consumer Commission of Singapore and Singapore Customs.
Additionally, the LTA is seeking feedback on the Open Category (Category E), which currently allows registration of any vehicle excluding motorcycles and has been used to register cars in categories with the highest COE premiums. Options include abolishing this category or restricting it to cars only, aiming to curb speculative bidding.
Stakeholders, including consumers and dealers, have expressed mixed reactions. Some view the proposals as a step toward recalibrating the system’s objectives, while others remain cautious about the uncertain impact on affordability and buying decisions. Members of the public and industry representatives engaged in focus groups and dialogues earlier this year provided input shaping the proposals.
Overall, the LTA’s review highlights the challenges of adapting a long-standing COE framework to evolving automotive technologies and market dynamics, balancing clear segmentation of vehicle types with the market-driven nature of COE pricing.