Proposed Overhaul of the COE System
The Land Transport Authority (LTA) has officially proposed merging Certificate of Entitlement (COE) categories A and B into a single passenger car category, marking a significant potential shift in Singapore’s vehicle ownership framework. The proposal, announced on Thursday, Oct 8, 2026, aims to modernize a system that officials and experts argue has become less effective due to rapid advancements in vehicle technology, particularly the rise of electric vehicles (EVs). According to the Land Transport Authority, the consultation process is open until Nov 2, 2026, with final recommendations expected in the first half of 2027.
The “Feebate” Mechanism
Central to the LTA’s proposal is a new “feebate” system designed to replace the current categorical split. Under this model, all passenger cars would bid from a single, unified COE pool. To differentiate between mass-market and luxury vehicles, the system would apply either a rebate or a surcharge based on a car’s Open Market Value (OMV). The LTA suggests that this approach would create a maximum price difference of S$30,000 between the highest-value and lowest-value segments, ensuring that the financial burden remains proportional to the vehicle’s market position.
The OMV for each model would be determined by the median value of past registrations within a set timeframe. The proposal outlines two potential structures: a three-band or a five-band system. In the five-band model, for instance, the lowest 10% of vehicles by value would receive a S$15,000 rebate, while the top 25% would face a S$15,000 surcharge. These bands would be reviewed and published annually to maintain market transparency.
Addressing Market Loopholes
The need for this reform stems from the narrowing gap between the two current categories. As noted by AsiaOne, the premium gap between Category A and Category B has shrunk significantly, with instances occurring where Category A prices actually exceeded Category B. Industry observers, such as Associate Professor Timothy Wong of the National University of Singapore, argue that the current system is easily bypassed by manufacturers adjusting vehicle specifications to qualify for the more affordable Category A. By shifting the focus to the dollar cost of the vehicle rather than technical specifications, the LTA hopes to restore the original policy intent of protecting mass-market buyers from being priced out by luxury vehicle owners.