COE Category Review 2026: The System Is Broken and Everyone Knows It
16 March 2026 · 10 min read · PaperValue.sg
In the first open bidding exercise of February 2026, a Honda Fit buyer paid more for their COE than a BMW buyer.
Read that again. A Category A certificate — the one designed to protect you from competing against luxury car buyers — cost $106,501. Category B? $105,001.
The system built to keep things fair charged the Honda Fit guy more than the BMW guy.
If you're wondering how we got here, it's a pretty simple story: the government drew a line in the sand, car manufacturers stepped right over it, and now LTA is standing there going, "Huh, maybe we should redraw that line."
Acting Transport Minister Jeffrey Siow announced on 4 March 2026 that the government will review how COE categories work. They're aiming to wrap up by year-end. That sounds like a policy story you can safely ignore.
It's not. Depending on which direction LTA goes, your car's value could shift by thousands of dollars. And nobody's really talking about that part.
How a Good Idea Turned Into a Joke
Here's what happened.
The Cat A / Cat B split was built for a world that doesn't exist anymore. Small engine = mass market car = Cat A. Big engine = premium car = Cat B. The original line was engine capacity: up to 1,600cc for Cat A, everything above in Cat B. Simple. Made sense in 2002 when a 1.6L Toyota was clearly a different animal from a 3.0L BMW.
In 2014, LTA noticed that turbocharged engines were making the engine-size distinction meaningless. A 1.4L turbo could make more power than a 2.0L naturally aspirated. So they added a power cap on top: 97kW (130bhp). Cat A now required both under 1,600cc and under 97kW.
Reasonable fix. Worked for a while.
Then EVs showed up and broke everything.
Electric motors don't have engine capacity, so in May 2022 LTA created a separate rule for them: fully electric cars with up to 110kW (147bhp) qualify for Cat A. The idea was to let mass-market EVs into the cheaper pool.
Here's the thing about electric motors — you can software-limit them to literally any power figure you want. A BYD Seal that makes 150kW in China? Slap a software cap on it, call it the "100kW variant," and congratulations — it slides under the 110kW EV threshold and into Cat A, competing against your Toyota Vios for the same COE.
The car weighs the same. Costs the same. Takes up the same parking space. But on paper, it's a "small" car.
And this isn't some edge case. The BYD Seal Dynamic 100kW. The BYD Seal 6 at 97kW. The Tesla Model 3 RWD 110. Nearly every EV brand in Singapore now sells a Cat A-friendly variant. They figured out the game and they're all playing it.
This is The Detune Loophole. Manufacturers don't build cheaper cars to fit Cat A. They build the same damn car and turn the software dial down.
The result? Cat A got crowded with premium EVs masquerading as mass-market cars. Prices converged. And eventually inverted. Your Honda Fit is now subsidising BMW's COE pool. Minister Siow himself said so in Parliament — the 2022 EV rule got gamed almost immediately.
Shocking? No. Entirely predictable? Yes.
Three Ways This Could Go
LTA hasn't committed to a direction. But based on what was discussed in Parliament, there are three realistic outcomes. Here's the quick version:
| Merge into one pool | Split by OMV (price) | Lower power threshold | |
|---|---|---|---|
| Likelihood | Very unlikely | Most likely | Possible |
| Cat A owners | Resale holds or rises | Biggest winners — pool clears out | Minimal change |
| Cat B owners | Slight downward pressure | Holds value, but replacement cost may rise | Minimal change |
| Detuned EV owners | No category shift | Resale pressure — future buyers face Cat B COE | Gradual resale pressure |
| Fixes the root problem? | No — removes protection | Yes — can't game price | No — resets the clock |
Now the details. Since the OMV-based split is by far the most likely outcome, that's where we'll spend the most time.
The Smart Fix: Split by Price, Not Power
This is the one that actually makes sense, and it's gaining the most traction.
Instead of categorising cars by engine power (which is trivially easy to game), use the car's Open Market Value — its cost before Singapore taxes, COE, and duties. A BYD Dolphin with an OMV of $22,000 and a BMW iX3 with an OMV of $65,000 are clearly different market segments. No amount of software trickery changes what a car costs.
What it means for your car:
If you own a detuned EV that snuck into Cat A — a BYD Seal 100kW, a Tesla Model 3 RWD 110 — and its OMV sits above the new threshold, your car just changed categories in the eyes of future buyers. The cost of replacing your car goes up (Cat B COE), which could put downward pressure on resale. The person buying your car secondhand now has to factor in the higher-category COE.
If you own a genuinely cheap Cat A car — Honda Fit, Toyota Vios, Suzuki Swift — you're probably the biggest winner in any scenario. The premium EVs that were crowding your pool get kicked out. Cat A demand drops. Premiums could ease. The cost of your next car improves.
If you own a Cat B car, it depends on whether more cars get pushed into your pool. More competition in Cat B could push premiums up slightly. Your existing car holds its value, but replacement cost might rise too.
The catch: OMV fluctuates with exchange rates. The same car model could cross the threshold between bidding rounds depending on what the yen or yuan is doing that week. That's a real headache for implementation.
Will it happen? This is the most likely outcome. It's the only option that actually fixes the root problem without blowing up the two-tier structure.
The Other Two Options (Briefly)
Merge everything into one pool. MP Edward Chia proposed scrapping Cat A and Cat B entirely. The logic is seductive — if prices have already converged, why pretend they're separate? The problem: a first-time buyer looking at a $170,000 BYD Dolphin would be bidding against someone buying a $400,000 Mercedes EQE. Mass-market protection gone. Minister Siow has already signalled this isn't happening, saying there's "probably still some merit" to keeping the two tiers.
Just move the EV power line. Lower the EV-specific threshold from 110kW to, say, 80kW. Maybe add vehicle weight or battery capacity as additional criteria. This is the path of least resistance — LTA did something similar in 2014 when they added the 97kW cap for ICE cars. The problem: it's a band-aid on a band-aid. The 2014 cap got gamed by turbos, the 2022 EV cap got gamed by software detuning. Any power-based threshold will be gamed again. You're just resetting the clock.
Don't Panic — This Has Happened Before
LTA has reviewed COE categories multiple times. Eight categories in 1990. Simplified to five in 1999. Power cap added in 2014. Every single time, the same pattern played out: uncertainty during the review, a brief rush when changes were announced, and normalisation within two to three quarters.
The 2014 change is the closest comparison. When LTA announced the 97kW power cap, roughly 50% of mass-market cars would have been reclassified. Manufacturers tweaked specs. Dealers adjusted pricing. Within a few bidding cycles, the new normal settled in.
Expect the same pattern. The sky isn't falling. But the ground is shifting.
The Part Nobody's Connecting: The PARF Squeeze
Here's what makes this whole thing worse. The COE category review isn't happening in isolation. It's landing on top of the Budget 2026 PARF rebate reduction — a separate policy that's already confirmed.
Under the new rules, the PARF rebate at the 10-year mark drops from 50% of ARF to just 5%. The cap falls from $60,000 to $30,000.
Think about what paper value actually is. It's the floor price of your car — COE rebate plus PARF rebate. That's what you'd get if you drove it straight to the scrapyard tomorrow.
The PARF change squeezes that floor from below. If the COE category review changes your replacement COE dynamics, it squeezes from above. Two structural shifts hitting your car's value from both directions at the same time.
Here's a concrete example. Say you own a 2017 Honda Vezel registered under Cat A with an ARF of $18,000 and a COE of $52,000. Under the old PARF rules at age 9, your PARF rebate would be roughly $9,900 (55% of ARF). Under the new Schedule 3 rules, that drops to about $900 (5% of ARF, capped at $30,000). Your COE rebate stays around $5,200 — but your total paper value floor just fell from ~$15,100 to ~$6,100. That's $9,000 gone from the bottom of your car's value. Now layer a COE category change on top that shifts what buyers expect to pay for replacement. Two hits, same car, same year.
If you're holding a car registered in 2016-2017, your COE expires in 2026-2027. Your scrap-or-renew math just changed, and it changed in a way that's worse than either policy would be alone.
So What Do You Actually Do?
Selling this year? Relax. The review won't produce changes until late 2026 at the earliest. Any new rules will come with transition periods — the 2014 change gave the market months to adjust.
Buying a new car? Pay attention to which models are gaming Cat A through detuning. If LTA moves to OMV-based categories, that detuned premium EV sitting in Cat A today could land in Cat B for future buyers. You don't want to buy at a Cat A price and sell at a Cat B valuation.
Deciding whether to renew in 2026-2027? Run the damn numbers. Factor in the new PARF rebate structure and the COE review. The economics of renewal vs replacement have shifted. Don't make a $50,000+ decision on vibes.
Not in a rush? Then wait. LTA aims to conclude by end of 2026. A few months of patience buys you clarity on the rules of a game worth six figures.
The Questions You're Actually Asking
"Will my car's category change?"
Almost certainly not for existing registrations. Every previous COE category change applied only to new registrations going forward. Your car keeps whatever category it was registered under. But the used market will price in the new rules. Your category stays the same; your resale value might not.
"When do changes kick in?"
Review wraps by end of 2026. Changes take effect 2027 at the earliest, with a transition period.
"Will COE prices drop if they merge categories?"
Merging pools doesn't create more COEs. The total supply stays the same. The merged price would settle between current Cat A and Cat B levels. Cat A prices could actually rise.
"I just bought a detuned EV under Cat A. Am I screwed?"
No. Your COE is locked at the premium you paid. What changes is how future buyers value your car when you sell. If you planned to hold it for 5+ years, the market will have fully adjusted by then.
Not sure how these changes affect your specific car? Get a PaperValue report — we calculate COE trends, PARF rebates, and market comparables so you can see exactly what your car is worth today.