International Business
Sales of Rolls-Royces which is a premium luxury car has trebled from 10 to 37 units, closely followed by Ferrari, which doubled its sales volume from 32 to 64 units this recent months. At the other end of the market, Proton sales fell by almost 40 per cent from 413 to 256 units, while Chery sales fell tremendously by more than half from 309 to 139 units. The story was similar among the German luxury makers such as BMW increased sales by almost 20 per cent from 3,926 to 4,708 units, neck-and-neck with Mercedes-Benz, which increased sales by 18per cent from 3,997 to 4,705 units. By contrast, the sales of traditional market leader Toyota slumped by over 60per cent from 17,555 to 6,927 units. Traditional number two Honda suffered an even sharper drop - by almost two-thirds, from 9,584 to 3,272 units.

Hence the reason for the shift in the pattern of demand must be the price of COEs. Generally, car buyers pay more (in total) and bear part of the COE price, while car dealers earn less profit margin and also bear part of the COE price. What matters most is the price sensitivity of car buyers and dealers , If car buyers are relatively price sensitive, then dealers must bear more of the COE. If car buyers are relatively price insensitive, then dealers can pass on more of the COE to buyers, hence many buyers in Singapore are more willing to spend more on luxury cars as they can afford easily. Buyers of BMW and Mercedes cars are probably less sensitive to price than buyers of Toyotas and Hondas. Furthermore BMW and Mercedes distributors make larger profit margins, and so can more easily bear part of the COE price than distributors of Toyota and Honda cars can. Thus, both on the demand and supply sides, there is more willingness to pay for the COE among the premium European brands than in the mass-market Japanese brands. So sales of BMWs and Mercedes