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How to Instantly Lower COE Costs with the Right Fleet System

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The pricey COE car ownership system in Singapore remains an issue for private and commercial vehicle owners alike, even though prices have seen a reasonable improvement at the beginning of 2024. Are these prices going to spike again, and how can fleet managers and companies be prepared for and manage volatile COE costs? 

If you’ve run out of ideas, don’t give up just yet. We’ve got some smart solutions lined up that can help you instantly lower COE costs and optimise your fleet budget.

In this article, you will:

  • Learn more about the COE system
  • Discover the Certificate of Entitlement bidding process
  • Find out why COEs pose obstacles for fleet managers
  • Equip yourself with tools to overcome COE-related obstacles
  • Identify how Cartrack can help you reduce COE costs

A brief overview of COE (Certificate of Entitlement)

As all vehicles in Singapore require a COE or Certificate of Entitlement, it’s essential to have a complete understanding of what it entails and what the requirements are as a fleet manager or owner of a logistics or private transport company with the need to acquire and manage multiple vehicles.

This unique licensing process has quite a history that explains why it exists and works the way it does, even though many now feel it might not be the most logical solution for traffic on public Singaporean roads anymore.

What is COE?

Good question. The COE or Certificate of Entitlement grants citizens the right to own and operate a motor vehicle on public roads - similar to a driver’s license in other countries.

For example, while citizens in countries like the US can acquire a vehicle license more freely and easily by simply passing a driving test, the COE takes an entirely different approach. To obtain the legal right to own and drive a car, individuals need to participate in an open bid uniform price auction, where the winning bidder obtains the right to register, own, and drive their car for ten years.  

This process has been in place since 1990 to regulate traffic congestion. Electronic Road Pricing (ERP) also helps limit harmful carbon emissions by controlling the number of ICE or internal combustion engine vehicles on the road.

One of the main goals of the COE system is to control the number of cars that use public roads. While it’s very effective in this regard, it does cause other issues, especially when it comes to the affordability and availability of COEs for new and prospecting car owners.

The COE bidding process explained

For newcomers, the COE bidding process may seem a bit daunting, but it’s a straightforward process that every fleet manager and owner should be familiar with.

  • To take part in the bidding process, you need to bid for a COE during one of the bi-monthly open bidding exercises.
  • Before each bidding exercise starts, the LTA or Land Transport Authority announces the available quota of COEs for vehicle categories A-E.
  • Here is the specific bidding procedure:

    1. Submit your bid using certain banks or ATMs. Corporate accounts can also use internet banking.
    2. After submission, you can keep yourself up to date by checking your bid status, and you also have the option of revising your bid.
    3.You’ll know whether you’ve obtained a COE after the bidding results are announced.

Here’s what vehicle categories A to E entail.

Vehicle categories

  1. Category A: Non-fully electric vehicles with an engine capacity of up to 1600cc and a maximum power output of up to 97kW. Also, fully-electric vehicles with a maximum power output of up to 110kW.
  2. Category B: Non-fully electric vehicles with engines above 1600cc or a maximum power output above 97kW and fully-electric vehicles with a maximum power output above 110kW
  3. Category C: Buses and vehicles that carry goods
  4. Category D: Motorcycles
  5. Category E: An open category—all vehicles except motorcycles

It’s also helpful to know that you can only transfer COEs in categories C and E once if you bid as an individual. For you as a company, business or organisation, the COEs are untransferrable. Finally, COEs in Categories A, B and D are also untransferable.

Vehicle_categories

The impact of COE on fleet-based companies

According to the Land Transport Authority or LTA, COE prices are expected to increase in 2024, and prospective vehicle owners are looking at looming COE prices that can even exceed the value of their cars. This is especially worrisome for fleet-based companies that rely on multiple vehicles, so ensuring that all other aspects of their fleet management operations don’t lead to unnecessary expenditure is crucial for instantly lowering the costs of COE plus overall fleet costs.

Apart from COE, fleet managers have other expenses to consider that are crucial for the business’s well-being in the short and long term. Knowing where the money comes from and ends up helps guide fleet companies’ managements to develop tools that relieve financial pressure, and making sure you reduce the overall cost of COE starts by looking at what constitutes the total cost of ownership.

How COE influences the total cost of ownership for fleet vehicles

Making sure you know where your money is going and how much you have available to spend on your business requires being familiar with all the components that contribute to your fleet’s total cost of ownership or TCO. Without COE taken into account, there are already several factors fleet owners and managers need to consider:

  1. Cost of capital

    If you don’t fully rely on financing to purchase business assets, business owners or fleet managers become prone to overlooking these costs of capital when calculating their TCO. Including it in your calculations makes a big difference in overall accuracy, which is crucial when you need to add a significant amount of the COE to reach your actual TCO total.
  2. Fuel

    Most fleet companies still rely largely on ICE or internal combustion engines. So, as fuel is the fire that keeps the engine of a fleet business going, it’s no surprise that fossil fuels take one of the largest chunks of a fleet business’s total budget.
  3. Vehicle maintenance

    Over a vehicle or asset’s lifetime, its maintenance costs increase due to ageing and vehicles becoming more prone to mechanical issues that require repairs and replacements. These costs are crucial for operations and need to be included in the TCO.
  4. Asset depreciation

    Vehicles are not typically assets that accrue value over time—quite the opposite. All vehicles, including fleet vehicles, start depreciating the moment they leave the showroom post-purchase, and because fleet vehicles typically have such high mileage due to constant use, depreciation happens even faster. This affects the total cost of ownership when selling current fleet vehicles and purchasing new ones.
  5. Licensing and vehicle administration

    Where law and order govern the land, vehicle licensing and administration will always be mandatory for fleet-based companies. And, with licensing and admin comes related costs that need to be considered as part of the total cost of ownership calculation.

On top of all of these components, COE prices, which are notoriously volatile, make a significant impact on a fleet’s TCO, making it all the more important to find ways you can cut COE costs for your fleet.

The most frequently asked questions about COE in fleet management

The sheer unpredictability of COE prices can lead to a lot of questions about why this system is still used and what the best ways are to tackle COEs cost-effectively as a fleet manager.

Here are some of the most frequently asked questions candidly answered.

1. Why is COE so expensive now?

The fact that COEs have become so pricey is a main issue for fleet managers and private car buyers alike. The factors contributing to the COE fluctuations include the number of COEs supplied, the number of potential car buyers and their purchasing power at that time, and the perceived value of car ownership among potential car buyers. 

All of these factors play an important role in determining COE cost. Because there is always a finite number of COEs available and many potential car buyers currently have high purchasing power, COEs are incredibly expensive.

2. How can I improve my COE system?

As a fleet manager or fleet company owner, there is little you can change about the actual implemented COE system at the moment as it’s government-regulated and controlled. However, this doesn’t mean there aren’t other ways you can improve the way you manage COE costs in your fleet business. A very influential factor is the technology you use to manage your fleet operations and how this tech can help you cut costs elsewhere to help balance your overall budgeting.

3. Will COE prices drop in 2024?

The start of 2024 looks promising with decent price drops in both bidding for Category A and B cars. However, with many factors influencing the price of COE, it’s difficult to determine if will stay like this, drop even further, or experience another massive hike, making it crucial for fleet managers to find other more reliable ways to reduce COE costs in the long run.

Factors influencing COE costs

Sky-high COE costs are caused by more than one factor. Knowing what these are can help fleet managers and business owners shape cost-savvy solutions that help relieve the financial pressure caused by Certificates of Entitlement.

Demand and supply dynamics in the COE market

In Singapore, the COE market is a balancing act between supply and demand. With limited land, the government regulates vehicle ownership through the COE quota, controlling how many cars can hit the road. But it's not just about rules; consumer interest and willingness to pay also sway the market. When demand spikes, so do COE prices, making buying a car a pricey affair. Government policies further shape the landscape, with interventions that can either stabilise or shake up the market.

This complex interplay of factors creates a dynamic COE market. Prices can skyrocket, prompting some to rethink their car-buying plans, or they can nosedive, presenting unexpected opportunities for savvy buyers. It's a rollercoaster ride that keeps all prospective vehicle buyers on their toes.

Government policies and regulations affecting COE prices

In Singapore, government policies and regulations have significant power over COE prices. The government plays the gatekeeper, controlling the issuance of COEs, which directly impacts their prices.

COE prices are like the stock market, fluctuating based on supply and demand. With prices determined by how many people are waving their wallets at the auction, it’s a bidding war out there.

However, it's not just about who's willing to spend the most cash; government policies and economic conditions also play a role. Factors like the number of cars hitting the scrapyard and the total number of vehicles on the road play a role in setting COE quotas. It's a balance between regulations, markets, and the economy, all of which have a direct hand in shaping COE prices.

Economic factors contributing to COE fluctuations

Various economic factors influence the ever-changing prices of COEs, and these include both supply and demand, government regulations, and more.

  1. COE quotas: When the Land Transport Authority (LTA) decides to increase COEs, supply goes up and prices go down.
  2. Demand for COEs: When everyone wants to get their hands on a COE, prices skyrocket. But when demand cools off, prices stabilise, reducing the financial strain.
  3. Economic conditions: Global economic turbulence or local uncertainty can dampen consumer spirits, leading to a dip in COE prices as prospective vehicle buyers tighten their wallets.
  4. Government policies: Policies like the 0% growth rate for cars or emission standards can shake up the market. Tighter regulations directly affect COE demand and prices.

COE prices are like a freehand recipe with a pinch of supply and demand, a sprinkle of economic conditions, and a hefty helping of government policies. And, it’s the “freehand” component in this mix that keeps the COE market in Singapore unpredictable and challenging for both private and commercial vehicle owners.

What challenges does COE pose for fleet owners?

COE costs can be volatile, and their fluctuation can cause devastation in a fleet company’s carefully planned budget. With COE costs skyrocketing within the past few years, this has become a real concern for fleet-based companies who are struggling more with decreased ROI and profit, which can lead to issues with vehicle upkeep, fuel expenditure, and paying loyal staff. 

All in all, the sky-high COE costs make it difficult to keep a fleet-based business afloat; take a look at the top challenges COE poses for fleet owners today, despite the welcomed price drop at the beginning of 2024.  

1. High costs

Running a fleet includes attempting to make operations high-functioning and economical simultaneously. CEO costs can be a significant burden for fleet owners and managers as it’s a mandatory but unpredictable amount of money they’ll need to spend at some point that affects operational expenses and long-term profitability. It’s like working out a budget for your business each year while knowing there’s a section you need to budget for that is so volatile and unpredictable that it can affect your business’s overall financial well-being.

2. Price volatility

With economic factors like supply and demand, government regulations, set quotas, and other factors like local and global economic conditions, COE prices are notoriously unpredictable, making effective budgeting or coming up with sound budgeting strategies for the future almost impossible for fleet management companies.

3. Strained flexibility

Building a business on a fleet of vehicles when the availability of these vehicles is dependent on a quota system can put a massive strain on expected or projected business growth. This means that you, as a fleet manager or owner, can’t necessarily acquire a new vehicle or replace an old one every time you need to because the quota system restricts the number of COEs available, making it either impossible or extremely expensive to do timely replacements or acquisitions.

Despite these challenges, fleet owners in Singapore can take essential steps to start managing their COE costs and gain control of their fleet budget by using GPS and telematics technology to their advantage.

What_challenges_does_COE_pose_for_fleet_owners

Strategies to lower COE costs with the right fleet system

While the implementation of COE causes many issues for fleet and car owners today, the system was originally implemented with the good intention of preventing over-congestion on Singaporean roads. 

Luckily, while the system remains in place, there are several things fleet companies can do to increase their fleet’s financial sustainability while following this costly process.

1. Proritise fleet right-sizing and optimisation

Make sure your fleet’s size and capabilities are streamlined to do exactly what it should do. This includes

  • Assessing the actual needs of the fleet
  • Implementing efficient route planning and scheduling

Through smart planning and the routes of their trucks, fleet managers can cut down on the number of vehicles required and potentially lessen the necessity for extra COEs.

2. Consider alternative fuel and vehicle options

Since being introduced into the automobile market, hybrid and electric vehicles have also become familiar additions to commercial fleets, and autonomous vehicles are also widely talked about. By

  • Exploring electric and hybrid vehicles
  • Evaluating and investing in fuel-efficient models,

you can choose fleet vehicles with better fuel efficiency, helping reduce overall operating costs that include COEs.

3. Partner with technology for cost-effective fleet management

When it comes to cutting costs where it matters most, technology is your best friend. Not only is state-of-the-art fleet management technology designed to detect the smallest drainages that add up to significant fleet management costs, but it also helps you track, maintain, and implement preventative measures for further savings. Look at

  • Telematics solutions
  • Fleet tracking and maintenance technology, and
  • Delivery optimisation software

to help identify where you can start cutting costs to compensate for hefty COE prices.

4. Leveraging data analytics for informed decision-making

Another force powered by technology you can use to optimise your fleet budget is data analytics. State-of-the-art fleet management technology allows you to

Along with monitoring COE prices and government policies, advanced data analytics can help you develop smart bidding strategies tailored to your fleet’s needs to keep costs minimal.

How Cartrack’s advanced fleet management technology can help you slash COE system costs

The more unnecessary costs you cut, the more spending money you have towards things your fleet and business really need. Cartrack Singapore prides itself on providing smart fleet management solutions that help you optimise your fleet operations with actionable insights at your fingertips. 

Cost management system: Gain financial control of your fleet vehicles’ maintenance, scheduling, and other potential issues with Cartrack’s powerful fleet cost management system. This online software application streamlines all your fleet management data on operational costs, including fuel, maintenance, and toll costs, onto one user-friendly database, giving you instant insight into your fleet’s running costs and access to smart cost-saving solutions. 

Fuel optimisation: Optimise your fleet’s fuel consumption with our advanced fuel monitoring system. Gain convenient access to real-time data on fuel consumption daily, weekly, or monthly, both per km or per job. Our advanced sensors installed inside fuel tanks enable real-time fuel consumption monitoring, enabling you to identify unusual fuel consumption activity and pinpoint the reason. Whether it be fuel fraud or negligent fuel-wasting driver behaviour, our fuel monitoring technology provides detailed fuel metrics for every vehicle, giving an accurate overview of your fleet’s fuel consumption and where you can cut crucial costs.

Workforce management: Streamline your business's workforce management and optimise customer service with dedicated software designed to empower fleet managers and drivers. With an intuitive and easy-to-use app-based platform for managing trips for deliveries or transport, you stay in control from scheduling to tracking and payment. Avoid delays and save fuel with our route optimisation feature. By analysing real-time traffic, road conditions, and route history, you can instantly increase route and time efficiency and supercharge savings. 

AI smart camera software: Do what you can to prevent costly accidents by getting around-the-clock, on-demand visuals of your fleet with Cartrack’s Live Vision AI cameras. With AI-powered, live-streaming technology, you monitor driver behaviour in real time with instant audible alerts when our smart camera technology detects distracted or dangerous driving behaviour like smoking, speeding, or fatigue.

Free up fleet finances to effectively manage COE costs with Cartrack’s advanced solutions

Contact us to gain full control of your fleet and start saving on your COE costs today.

Discover how to slash COE costs for your fleet budgeting. Take control and reduce expenses with our expert tips.