Singapore car demand remains firm

Singapore car demand remains firm

SINGAPORE (Reuter): Demand for cars in Singapore -- among the most expensive in the world thanks to high import duties and a car quota system -- continues to remain firm despite recent government measures to cool the market, car dealers and analysts said.

However, prices paid by buyers are on the way down since the government made car quotas non-transferable in an effort to curb speculation in quotas earlier this year. Also, car dealers are offering free holidays and other incentives to buyers, analysts said.

The prices of quotas for mid-sized cars, which reached a peak of S$95,100 (US$67,928)in November 1994, have more than halved to S$41,400 (US$29,571) in June.

Under Singapore's car quota system, introduced about five years ago by the government to control vehicle growth, an aspiring new carowner has to bid for a quota from the Registry of Vehicles (ROV) before buying a new car.

According to figures from the ROV, the number of bids received still outnumber the quotas available at its monthly tenders.

For the June and July tenders, ROV received were 9,011 and 7,350 bids respectively. In both months, about 3,800 quotas were offered.

"There are more than enough buyers out there still," said Jon Khiam Yip, managing director of Sime Singapore, the agent for BMW cars in Singapore.

Yip said the local car market would continue to post modest growth within the government limit of a three percent rise per year.

Another factor moderating growth has been the Monetary Authority of Singapore's (MAS) move to tighten up on car loans, said an analyst with Baring Securities.

"The measures have affected new car buyers, especially in the small cars segment," she said.

Under the measures announced in February, the MAS cut the maximum loan period for cars to seven years from 10 years.

It also reduced the maximum car loan amount to 70 percent of the purchase price including the price of the quota against 100 percent previously.

Car dealers say the cut in loans has clearly affected aspiring car owners.

Large car loans are widespread as there are no cheap new cars in Singapore despite lower quota prices. For example, the price of a small Suzuki Esteem, including its quota, sells for around S$93,000 ($66,428).

"Not too many people are able to put down a down payment of 30 percent, even for a small car," said a dealer for European-made cars.

News that the MAS has projected slower economic growth for 1995 has also made motorists more cautious.

"It's a buyer's market now and dealers have to be more aggressive in pushing their cars," said another dealer.

Sime's Yip said the company is offering free Australian holidays to buyers of the new BMW compact model.

But at least one car distributor, Cycle & Carriage (C&C), which sells Mercedes Benz where prices (excluding the quota) start from around S$162,000 ($115,714) upwards, continues to see strong sales despite the curbs.

Cheah Kim Teck, C&C general manager for sales and marketing, said there is still a backlog for some cars with some buyers still having to wait for three months for the popular E200 model.

Mercedes Benz car sales have not been affected by the lower quantum for car loans, he added.