Separate COE category for private-hire cars still under review

A decision has not been made on whether to carve out a separate certificate of entitlement (COE) category for private-hire cars, said Transport Minister Chee Hong Tat.

Creating a separate COE category is one of the issues being considered in an ongoing review of the point-to-point transport sector, which Mr Chee said he will give an update on during the debate on his ministry’s budget in 2025 in Parliament.

He added that the Government is unlikely to decide on whether to have a new category by then due to the difficulty of determining how many COEs to allocate to private-hire cars and the impact this move would have on existing COE categories.

Speaking to reporters in an interview on Dec 3, Mr Chee said that unlike taxis, private-hire cars can be converted into personal cars, and vice versa.

Second, the demand from rental fleet companies fluctuates, which makes it difficult to accurately assess the supply they will need.

COEs for a new private-hire category would have to be drawn from the supply set aside for Category A – for smaller and less powerful cars – and Category B, which is for larger, more powerful cars.

Shifting too many COEs would cause premiums in the two car categories to spike, Mr Chee noted.

But shifting too few could result in an insufficient number of private-hire cars, which in turn would mean higher fares, especially during peak hours.

“If you’re not careful, you calculate wrongly, or you estimate wrongly, and you transfer too much or too little, there will be downstream negative consequences.

“So that’s why we need to be a bit careful when it comes to whether or not we want a separate category,” he said.

As part of the review, the Land Transport Authority (LTA) is also looking at how it can encourage drivers entering the point-to-point transport sector to opt for taxis and not gravitate automatically to private-hire cars, Mr Chee said.

While acknowledging the shift in preference among drivers and passengers to private-hire cars and ride-hailing services, he said it is important to maintain a sufficient supply of taxis as they cater to a different group of passengers, including those who prefer to flag down cabs on the street, and tourists.

“If you don’t have enough taxis, actually you do lose something in the system,” he noted.

Besides offering ride-hailing services, taxis can pick up passengers on the street and at taxi stands. In comparison, private-hire cars have to rely on ride-hailing apps to pick up passengers.

According to LTA data, street-hail trips accounted for 10.7 per cent of the 630,000 daily trips handled by the point-to-point transport industry in October.

This is down from 20.8 per cent of the 530,000 daily trips in October 2021.

The ongoing review of the point-to-point sector was slated to conclude by the second half of 2024.

Mr Chee said LTA is also studying safeguards to prevent large operators from rolling out measures that effectively lock in passengers and drivers to their ride-hailing platforms.

While the review is ongoing, some changes have already been made to make ride-hailing and taxi services more accessible to different user groups, minimise the disruption to users and drivers, and lower the operating costs for taxi companies.

On having a separate COE category, Mr Chee said such calls were driven by concerns that demand for private-hire cars were behind high COE premiums.

“There are other things that we can do in order to give people greater assurance of the (COE) supply.”

In October, LTA announced that up to 20,000 additional COEs will be injected over the next few years.

Asked whether the injection of COEs will help bring down premiums and if more can be done to stabilise COE prices, Mr Chee said: “The Government can only control the supply of COE. I cannot control the demand.”

He added: “If prices come down, I think that will be a good outcome for car buyers.”

COE supply for a given three-month quota period is primarily determined by the average number of deregistrations in the previous four quarters.

More vehicles are expected to be scrapped in the coming years, with the COE supply projected to peak around 2026 and 2027. The supply in 2022 was the lowest since 2013.

To reduce the gap between peak and trough supply years, LTA has applied a “cut and fill” approach, where some COEs that are due to expire in the peak years are brought forward to years when supply is low.

Mr Chee said he did not think the fluctuations in COE supply between peak and trough years can be completely eliminated, because of the size of the gap.

He noted that LTA cannot reallocate too many COEs from the peak supply years, as demand for COEs will also likely be higher during that period.

The 20,000 additional COEs will allow the Government to shore up supply in the near term without having to cut the supply from the peak years, Mr Chee said.