Why Singapore still needs more cars

Christopher Tan, The Straits Times AsiaOne 20 Mar 15;

WHEN the COE system was just four years old in 1994, well-respected transport and behavioural economist Anthony Chin predicted that, in time, only top earners in Singapore would be able to afford cars.

The Government dismissed his assertion and, in the two decades since, it would seem that Professor Chin - who died last year at the age of 57 after a short illness - got it wrong.

Car ownership has been rising, not falling. By 2012, 45 per cent of households owned cars - up from less than 35 per cent when the certificate of entitlement (COE) system was introduced in 1990.

But the trend is reversing. After allowing the car population to grow at 3 per cent a year since 1990, the Government halved it to 1.5 per cent in 2009. The cap has been lowered three more times since and is now at 0.25 per cent.

And last week, Senior Minister of State for Transport Josephine Teo announced in Parliament that it is likely to go to zero per cent some time "in the future".

With Singapore's population growing, what this means is that the percentage of car-owning households will start shrinking. In fact, the contraction has already started.

Currently, it is estimated that 44 per cent of households own cars - one percentage point lower than in 2012. And when the population grows to, say, 6.9 million, that figure could go down to 35 per cent.

That is assuming the number of cars remains constant. But there are signs that the car population has been dipping, even with an allowed 0.25 per cent growth.
Last month, there were 597,152 cars on the road, the lowest number in four years.

If and when zero growth kicks in some time "in the future", the shrinkage might well accelerate. Then, the late Prof Chin's pronouncement in 1994 might ring true indeed.

It is not an unexpected outcome, though. Any pricing mechanism, taken to its logical end, will always mean the less well-to-do making way for the more well-to- do. And in any land-scarce city, it is also logical that the majority relies on public transport.

The question is: Why did we allow the car population to grow at 3 per cent per annum for 18 long years before deciding that it was not sustainable?

It is much harder to persuade someone who has been driving to give up his car than to convince him he does not need a car before he went out and bought one.

So why 3 per cent? Actually, the growth rate was pegged at just below the historical growth rate of Singapore's car population in the pre-COE days before 1990.

And it was pegged well below the foreseeable growth rate that would have resulted from rising income levels.

Here's the interesting thing, though. The actual growth rate was more than 3 per cent. Between 1991 and 2010, the car population grew by an average of 4 per cent per annum.

This was largely because the Government could not get the COE supply formula right and, for many years, dished out far more certificates than the number of cars taken off the road.

It came to a point where people who would normally buy a motorcycle decided to fork out a bit more for a car instead. One could get a new budget car for well under $30,000.
The oversupply situation was so serious that even motor traders publicly called for the COE supply to be cut.