Singapore is letting more cars on the road – and that's driving retail sales

To manage traffic on a densely populated island, Singapore's government maintains strict rules on vehicle ownership. Aspiring drivers must acquire certificates of entitlement (COEs) - permits that give the holder the right to own and use a vehicle over a 10-year period.

This quota system has been boosted over the past year - and the increase is showing up in official retail sales data.

Indeed, cars have been one of the few bright spots in consumer demand; excluding motor vehicle sales, the government's retail sales index has often posted negative year-on-year growth lately, as our first chart shows.

(The Lunar New Year effect is also visible on our chart – i.e., that February shopping spree for all kinds of goods other than cars.)

Using the "heat map" visualization, we see that September 2024 was the best month for auto sales in a year.

In October, the government decided that Singapore's roads could absorb even more COEs over the next few years. What's driving this policy approach? A new satellite-driven road pricing system has enabled better traffic management, while the pandemic spurred the rise of remote work; vehicle usage fell between 2019 and 2023.

Our final charts examine the longer-term market for the right to car ownership. From about 2017 to 2022, the auto quota had been shrinking for years, while the premiums drivers paid to get a COE rose. If historical relationships hold, this trend should reverse itself.

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