Why are rental car operators hesitant to expand their fleets?

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Rental Car Operators Cautious on Fleet Expansion Amid COE Price Uncertainty

Rental car operators are exhibiting hesitancy in expanding their fleets primarily due to the unpredictable nature of future Certificate of Entitlement (COE) prices. This caution stems from the significant financial risk involved in acquiring vehicles at potentially high prices, only to face a sharp decline in COE premiums shortly thereafter. Such a scenario would leave companies holding expensive assets, impacting their profitability.
Uncertainty Over COE Premiums Creates Financial Risk

The core of the hesitation lies in the volatility of COE prices, which are a mandatory requirement for vehicle registration in Singapore. These premiums have fluctuated significantly, ranging from S$102,009 to S$130,889 in 2026, a considerable increase from the S$65,010 to S$116,002 range observed in 2024. This unpredictability makes it challenging for rental businesses to make strategic purchasing decisions, as a sudden drop in COE prices after a fleet expansion could lead to substantial financial losses on newly acquired vehicles.
Growing Rental Demand Contrasts with Operator Caution

Despite a discernible increase in demand for rental vehicles, operators are not readily increasing their fleet sizes. Adrian Lee, president of the Vehicle Rental Association, has noted this growing demand but simultaneously highlighted the operators' cautious stance. This divergence suggests that while more individuals are opting for rentals, the underlying economic uncertainties, particularly concerning COE prices, are preventing businesses from capitalizing fully on this trend by expanding their offerings.
Fleet Composition Shifts Due to Ride-Hailing Regulations

Changes in the composition of the rental fleet have also been observed, partly influenced by regulatory measures. The number of self-drive rental cars has seen an increase, rising from 33,765 at the end of 2025 to 36,317 by June. Conversely, rental cars utilized for ride-hailing or chauffeured services have experienced a slight decline, from 62,092 to 61,250. This shift may be attributed to a three-year lock-in period introduced in February 2025 for business-owned ride-hailing vehicles, which restricts their sale or conversion to private cars, thereby impacting the availability and operational dynamics of this segment of the rental market.

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Why are rental car operators hesitant to expand their fleets?

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