Review of the car industry

Controlling the vehicle population to keep Singapore roads congestion-free has always been a high priority of the government. But despite the ever increasing cost of owning and maintaining a private car, demand for cars remains strong because of growing affluence . The latest control measures include the quota system, which effectively limits the number of new cars to be put on the road every year by using a predetermined number of Certificates Of Entitlement(COE). There is also the Weekend Car Scheme which allows usage of this special category of cars during off-peak periods. With the implementation of the COE scheme in 1990, the car population growth has been capped at 3 %p.a. This has led to several changes in the industry. The objective of this study is to examine the impact of the COE scheme on the major players in the industry viz car dealers, car buyers and financial institutions. An attempt is also made to forecast the future of the car industry in terms of demand and supply of cars. Extensive field work was done for this project including interviews with car dealers and financiers and survey on 150 individuals to determine their behavior with regard to car purchase. We also relied on newspaper articles and periodicals for information relevant to the project. Although not intended by the government, the COE scheme has substantially increased the cost of new cars to buyers. Car dealers, in order to maintain their share of the pie which has limited room for growth, have resorted to slashing profit margin in order to subsidies the cost of the COBs. Financiers have gained from the scheme because of the increased loan volume to meet the higher cost of cars and financing needs of dealers for COBs.BUSINES