Missing features delayed shipments, and high COE prices pushed car buyers to the resale market

[ASEAN NOW News]

Raj Nadarajan/TODAY

A car dealership in Ubi Road 1 on March 27.

 

SINGAPORE — Some car models arriving in Singapore are missing parts such as touch screens and communication systems due to an ongoing crunch in the semiconductor industry.

 

According to Today Online, the delays in receiving brand new, fully equipped cars, coupled with a confluence of other factors such high Certificate of Entitlement (COE) prices, have left some car buyers here turning to second-hand cars instead.

 

The global semiconductor supply has been hit since 2020 due the Covid-19 pandemic as well as tensions between the United States and China.

 

Supply has recently been exacerbated by the Russia-Ukraine war. Ukraine is a major supplier of wire harnesses, which are a critical component of vehicles.

 

The supply crunch has affected the production of electronic devices in which semiconductors are predominantly used, such as smartphones, computers and cars.

 

Missing features

 

In Singapore, some new cars have been arriving since last year without some added frills.

 

Mr Lars Nielsen, the managing director of BMW Group Asia, said that certain features such as touchscreen functionality, digital key and wireless charging are currently unavailable in some of the brand’s vehicles in Singapore.

 

Last year, about 30 per cent of BMW vehicles in Singapore had at least one feature omitted due to the shortage in semiconductors, said Mr Nielsen.

 

Mr Abel Eng, the director of dealership CarBiz, said that components of steering wheels and communication modules were also removed in some cars arriving here.

 

Mr Eng said he did not have specific information of which car models were more affected by the shortage in semiconductors but said it was “common knowledge” that car manufacturers will divert available parts to models that make the most money.

 

For example, they will divert available semiconductor parts to “high profit margin, low volume” cars such as the Mercedes-Benz S-Class model over “high volume, low profit margin cars” such as the Mercedes-Benz C-Class model, he explained.

 

The semiconductor supply crunch has meant longer-than-usual delays in the shipment of new cars, said car dealers.

 

Mr Eng said that before the Covid-19 pandemic when there was no disruption to the semiconductor supply, the wait for a new car was between three and six months.

 

But since the disruption started, a car can take up to nine months to be delivered. This waiting time has now been lengthened by a further three months due to the Russia-Ukraine war, said Mr Eng.

 

Mr Nielsen of BMW said he was unable to specify how long more buyers would have to wait for fully equipped BMW cars due to the “fluid” situation.

 

Likewise, a spokesperson for Daimler Southeast Asia, which manufactures Mercedes-Benz cars, said that the delay in delivery times would vary depending on the model and the equipment of the individual models.

 

Nevertheless, Mr Raymond Tang, the managing director of Yong Lee Seng Motor, said that the semiconductor shortage was not affecting the prices of cars in Singapore, as these are mainly determined by COE.

 

Some agents also bring in cars with missing features first, and then ship in the necessary parts to make them fully equipped, he added.

 

Delayed shipments

 

Car dealers said that they observed an increase in customers turning to used cars in recent times.

 

Mr Daniel Ng, the general manager of used car distributor Eurokars Pre-Owned, said that the company has seen a 20 per cent increase in sales for pre-owned vehicles between last November and this February.

 

Both Mr Eng and Mr Tang estimated that about 50 per cent more of their customers are picking up second-hand cars this year compared to last year.

 

Mr Eng pinned the increase on a “confluence of factors”, including the delay in shipment of new cars, high COE prices, as well as a higher tax on luxury cars imposed last month.

 

COE prices for cars went up at the end of the latest bidding exercise last Wednesday. Premiums for small cars closed at S$71,556 while those for larger cars closed at S$98,889.

 

Mr Tang added that customers were also choosing resale over new cars as the former afforded more price certainty.

 

With resale cars, customers are certain of their car prices as these are based on prevailing COE prices.

In the case of new cars, however, the COE prices could go up by the time the shipment arrives in Singapore, said Mr Tang.

 

Buyers reactions

 

Mr Mark Koh said that he was deterred from buying a new car due to the high cost.  

 

But even if they were affordable, the 30-year-old sales manager said that he would still prefer a pre-owned car rather than a new car without frills like a touch screen as “technology is something I would want in a good car”.

 

Similarly, a 42-year-old buyer who wanted to be known only as Mr Tan said that he prefers an older car model with all features included, rather than a new car with missing features.

 

Mr Tan, who works in a bank, said that carmakers should only release cars with all features intact as consumers may overlook the missing features, but end up paying the same price.

 

One buyer, however, said he will still buy a new car as he does not want a resale car that might be defective.

 

The buyer, 30-year-old dentist Bobby Tan, is willing to buy a new car even if it comes without certain features and faces shipment delays.

 

He said: “I am just looking to get something that can get me from one point to another.”