LTA redistributed over 30,000 COEs using ‘cut-and-fill’ approach since May 2023

The Land Transport Authority (LTA) has redistributed 30,813 Certificates of Entitlement (COEs) across all vehicle categories since May 2023 through a “cut-and-fill” approach aimed at mitigating supply volatility in Singapore’s vehicle quota system.

This was confirmed in a written reply by Acting Minister for Transport Jeffrey Siow to a parliamentary question from Associate Professor Jamus Jerome Lim, a Member of Parliament for Sengkang GRC.

Assoc Prof Lim had asked for the number of COEs reassigned from guaranteed deregistrations of 5-year non-extendable and standard 10-year COEs, and whether the Ministry had any further medium-term plans to stabilise supply across years.

Minister Siow stated that LTA will continue to monitor the COE supply to maintain its stability, though no specific breakdown was provided between 5-year and 10-year COE reallocations.

‘Cut-and-fill’ redistribution began in 2023

The “cut-and-fill” method, introduced in late 2023, allows LTA to bring forward COEs from peak years — based on guaranteed future deregistrations — to fill current troughs in supply. This redistribution, while maintaining the zero-vehicle growth policy, is designed to even out the sharp supply fluctuations that have contributed to price spikes.

As then-Acting Minister for Transport Chee Hong Tat explained in Parliament on 6 November 2023, the COE quota system’s reliance on deregistration figures from the preceding four quarters creates significant variation between years. This, in turn, results in volatility in COE premiums if demand remains constant.

At the time, Minister Chee said: “A better outcome can be achieved for all stakeholders... if we can reduce the peak-to-trough ratio by using a ‘cut-and-fill’ approach to shave off future peaks and using this supply to fill the current troughs.”

Constraints limiting further supply growth

Despite these efforts, additional injections remain constrained by two primary factors.

First, a new COE quota calculation method was introduced in 2023. While the previous system used a three-month moving average of deregistrations, the revised formula uses a longer four-quarter moving average. This smooths quarterly changes but also delays the reflection of actual deregistration surges, slowing down quota expansion in the short term.

Second, more vehicle owners are opting to revalidate their COEs instead of deregistering vehicles. This trend reduces the number of COEs returned to the pool, particularly in a tight market where replacement costs for vehicles have surged.

These constraints have hindered the pace at which additional COEs can be redistributed, even as LTA pushes ahead with the “cut-and-fill” strategy.

Near-term COE supply outlook remains tight

The supply of COEs for the November 2024 to January 2025 bidding period saw a modest 1.5 per cent increase, reaching 18,984 COEs — up from 18,701 in the previous quarter. This was the smallest rise in recent quarters, following increases of 6 per cent (May to July) and 8 per cent in the preceding quarter.

According to LTA, Category A (small cars) is expected to see peak supply soon, with more stable supply anticipated across upcoming quarters. However, many vehicle categories continue to face tight availability.

Passenger car and commercial vehicle dealers have indicated that significant price relief is unlikely before 2026. This timeline coincides with projections for a sharp increase in deregistrations as vehicles bought during the previous COE supply peak (in 2016–2017) reach the end of their 10-year lifespan.

Medium-term adjustments and ERP 2.0 implementation

In October 2024, LTA reaffirmed its commitment to inject up to 20,000 additional COEs across vehicle categories over “the next few years.” This multi-year redistribution strategy aligns with the planned rollout of ERP 2.0, Singapore’s next-generation electronic road pricing system.

The COE quota for any period is made up of various components:

• 25 per cent of replacement COEs from vehicle deregistrations during a defined 12-month window (currently October 2024 to September 2025),

• Provision for 0.25 per cent annual growth for Category C,

• Adjustments for changes in taxi fleet size, expired Temporary COEs, and commercial vehicle early turnover,

• Redistribution of COEs from guaranteed deregistrations,

• Injection of additional COEs under strategic policy measures.

The next quota announcement, covering February to April 2026, will be released in January 2026.