Yahoo Finance Here’s Why Uber is NOT Going to Cause COE Prices to Rise in the Short Term
In the wonderful world of Singapore, COE prices are one of our favourite topics to bitch about over a nice steaming cup of kopi-C or hipster coffee (depending on your demographic).
It’s also safe to say that just about everyone on the island who isn’t a taxi driver agrees that Uber’s entry into the market is a good thing, because it’s single-handedly raised the standards of the entire taxi industry.
So the latest news that Uber are pushing up COE prices has been met with confused emotions.
According to the news report, Uber were responsible for 870 bids in all three COE categories in the latest COE bidding exercise, and were successful in all but 30. The total number of COEs Uber have secured in the last two months is about 1,700.
But hold your horses. Here’s why we doubt Uber are going to have much of an effect on COE prices in the short term.
The glut of bidding is likely to die off once Uber have built their fleet
Uber are not going to be bidding like this twice a month. There are only so many cars the company needs.
At the moment, being a relatively new entrant in the market, it is clear they are trying to build their fleet, but once that is done we can expect the bidding to taper off.
Seeing as they already have close to 2,000 cars, we can probably expect this to happen sooner rather than later.
Uber are unlikely to place over-the-top bids for COEs
The worry that Uber are going to enter sky-high bids for COES, thus pricing everyone else out of the market, is unfounded.
Rich Indonesian businessmen and real estate magnates may not mind putting in crazy high bids just because they want to make sure they can secure that COE for their imported Porsche.
But let’s not forget that unlike them, Uber are a business. They are not motivated by emotion or desire—they’re motivated by profits. Which means they’re likely to only bid as high as they have to.
What should the government do to protect car buyers?
While Uber are unlikely to have a real impact on COE prices in the short-term, in the long-term this could cause problems.
First of all, there’s no telling that Uber will always be the only service that’s going to bid for large numbers of cars on the market. There are already a number of car and limousine services like GrabCar.
Uber’s presence on the market can also indirectly increase the number of car owners, since more people might be encouraged to take on a car loan in hopes that they’ll be able to subsidise their loan repayments by moonlighting as Uber drivers.
For the medium and longer term, the government might need to start differentiating between COEs for cars bought purely for private use, and cars purchased with commercial intent.
While it will be easy to hive off some COEs for cars bought by companies like Uber, it’ll be a little harder to regulate purchases of individuals who buy cars for their own use but just happen to be taking Uber customers in their spare time.
How they choose to go about this is trickier. They could either lump such COEs in Category E, the Open Category, which is also where taxi operators go to scrounge for new COEs when they expand their fleet. Or they could create a new category for cars purchased for commercial use.
While Uber is unlikely to make your car purchase that much more expensive this year, they’ve started a chain reaction that could change the landscape of car ownership in future.
More and more people could start seeing car-driving as a possibility in their future, so long as they’re willing to ply the roads to subsidise the cost.
What this means for the average car purchaser really depends on how the COE system evolves.
What do you think Uber’s impact on COE prices in the long-term will be? Tell us in the comments!
The post Here's Why Uber is NOT Going to Cause COE Prices to Rise in the Short Term appeared first on the MoneySmart blog.
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