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Singaporean buyers turn backs on budget cars

Publication Date : 17-07-2012

 

Is the end near for small, budget cars in Singapore?

Two weeks before the number of certificates of entitlement (COE) in the small car category takes another 37 per cent cut, dealers this past weekend said their customers were looking at small car offerings - from premium brands.

With COE prices for small cars hitting S$59,421 (US$47,000) at the last bidding exercise, most consumers are just not willing to buy an expensive COE for a cheap car.

Others, like business owner Jason Tan, 44, see economic sense in spending slightly more for a small car with a big name.

"With COE prices so high, I can't change my car all the time. It's more value for money to get a slightly more expensive car and use it for the long term," said Tan, eyeing a Mercedes-Benz at the Cycle and Carriage showroom in Leng Kee Road on Sunday.

In recent years, small budget cars have increasingly been passed over for their shinier, premium competitors.

In the first quarter of the year, premium and luxury brands made up 45 per cent of sales in the small car segment - cars of 1,600cc or less; five years ago, this figure was 0.3 per cent.

With COE prices as high as they are now, some premium small cars may cost just S$10,000 (US$7,900) to S$20,000 (US$15,800) more than a small budget car. Industry watchers said the volume of small budget cars will continue to slide further.

A dealer who declined to be named said: "Dealerships with deep pockets will be able to bid in this climate. This is a situation where some of the smaller brands will die out."

Chinese maker Geely, for example, which sells small budget cars - already exited Singapore's market last year due to poor sales.

The news is not all bad.

Dealers said that while the well-to-do head towards premium car brands offering small cars, there would still be consumers looking for a 'value buy'.

Tan Kheng Hwee, general manager of Kah Motor, the agent of Honda, noted that while S$10,000 to S$20,000 spread over 10 years would mean little to the rich, there were still many 'savvy consumers' out there.

"Good value for money will never go out of fashion," she said.

Dealers also foresee that affluent buyers will soon shift to the big car category, easing the pressure on small car premiums.

Michael Wong, vice-president of the Motor Traders Association, explained: "With premiums for small cars going up, the difference in premiums between small and luxury cars will narrow. Some buyers will shift to buying a bigger car instead."

Asked whether premium car brands should be disallowed from bidding in the small car category, Government Parliamentary Committee for Transport head Cedric Foo said that he was sympathetic to car buyers with budget constraints.

"When constraints are placed on a free market, commercial entities will find a way to get around these rules and work out an advantage," he said.

Tan said that the government should rethink and revamp the COE system if its intention is to keep certain types of cars affordable for the less affluent.

"If this is the purpose, then it is clearly not working because taxi companies and bidders with the deepest pockets are also bidding in this category," she said.

 

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