Rising premiums for commercial vehicles will ‘hit SMEs hardest’

The Certificate of Entitlement (COE) quota for commercial vehicles will be slashed by about one-third for the coming three months — the heaviest of three categories with lowered quotas — dealing a blow to businesses, which have had to contend with rising premiums.

This is on top of other problems they already have to deal with, such as rising rentals, increased foreign levies and a manpower crunch.

Companies say rising premiums will hit small and medium enterprises (SMEs) the hardest, with customers bearing the brunt of higher costs.

Mr Tan Chim Hoon, owner of Hoon Hoe Bros Renovation & Trading, said he has been using his five lorries for more than 10 years, but is unable to change them as COE prices are just too high.

He currently spends S$200 to S$300 a month on repairs for all his vehicles. “I’m very worried that my vehicles will start to have problems, so I tell my workers to drive very safely. It’s very tough,” he said.

Mr Thomas Ng, director of Hua Sun Construction, said the reduced quotas will drive up prices for vehicles. Furthermore, with foreign worker levies going up across the board from this month, these pressures lead to greater costs. Businesses may have no choice but to pass them on to customers, he said.

The main purpose of the COE system is to reduce the number of vehicles on the road and to shift drivers to public transport. “But as SMEs, we cannot ask our workers to use public transport and carry a bag of cement or cartons of goods,” he said.

“So commercial bidding cannot be put on par with private car bidding.”

Mr Chris Chong, co-founder of online fresh meat and seafood delivery service GoFresh, said he has plans to buy larger vehicles eventually, in tandem with demand. But with rising premiums, he might just stick to motorcycles for now.

Offering another perspective, Mr Glenn Tan, president of the Motor Traders Association, noted that higher COE prices could help push more businesses to participate in the enhanced Early Turnover Scheme — which encourages the replacement of old commercial diesel vehicles with new Euro 5 ones, which are less polluting. Owners pay a lower, pro-rated COE premium for their replacement vehicles.

But Mr Ng disagrees, pointing out that the COE discount is still minimal and the scheme does not help SMEs that want to expand and buy new vehicles.

Dr Tan Khay Boon, an economist from SIM Global Education, said the impact on business cost for non-transport related business is “not likely to be significant” as the bulk of their operation costs is wage and rental costs.

“But for transport-related businesses or business with high percentage of cost in transport, the higher cost of acquiring the vehicles will likely be passed on to consumers.”