Vehicle Growth Rate to Zero: will Driver earnings be affected?

Channel NewsAsia has reported that the Land Transport Authority of Singapore plans to reduce vehicle growth in Singapore to Zero Percent for Category A, B and D COE.

The latest round of zero-vehicle growth will last till the next review in 2020.

The decision to reduce growth from 0.25% to Zero in February 2018 is aim to encourage Singaporeans to go Car-lite and take the public transport. It also added Singapore is always facing a constraint in land and roads network is already taking up 15% of land usage.

The government would further invest $24 billion in new and existing rail infrastructure. 

Danger – Driver cost likely to increase

The first thing that comes to people mind after hearing the announcement would the increase in competition for the limited number of COE increase the cost of car ownership.

Market observers believe that it is highly possible that car prices are projected to increase. There is a growing trend of car owners renewing their vehicle’s COE, as it presents a lower cost of ownership in an uncertain economic environment. Renewal of COE will limit the number of available COE for new cars. Grab’s recent announcement of their plan to set up largest car rental fleet might trigger a rush to buy mentality for many car buyers and rental companies. Consumers have previously experienced a sharp spike in car prices when Lion City Rental was aggressively buying and building up its fleet of cars. Armed with a USD$700 million war chest, Grab is expected to gobble up as much COE as possible to set up the fleet at the initial stage.

These factors coming together look set to push car prices to a new high in 2018.

Opportunity – Drivers earnings might increase

As car prices look set to head north, owning a car may prove to be too expensive for many. Despite LTA removing the need to register a company for owning a private-hire vehicle, the high cost of car ownership may become a barrier to entry for new drivers who want to use their own vehicle for private-hire usage.

The changing consumer behaviour from taxis to private-hire is evident in Singapore. Riders are no longer limited to young and tech-savvy people. There is an increasing number of macik, pacik, ah gong and ah mas embracing technology and private-hire. Afterall, they should be no stranger to ‘pirate taxis’ which were prevalent in the 1960s. Many riders have also been deeply poisoned by the weekly promo code that Grab and Uber have fed them over the past few years, so much so that some riders have totally given up on public transport. They rely solely on private-hire or social carpooling service GrabHitch to commute.

Uncertain times ahead

Will high cost lead to higher rental prices? Will the projected increase in rider’s demand be sufficient to offset the expected rise in costs? How would Grab determination to be the biggest player impact the industry?

The presence of competition is crucial for driver’s survivor in the private-hire industry. The fall of any player would present a big problem for drivers.

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Commander-in-Chief @ Firstlane Swam to Sunny island to escape from the half-brother who ruled with an iron-fist and feed the family with needles or to dogs. Kim is my family name and Jio is my favorite fruit. Screwing around with Uber & Grab since 2014