Cat A Is Softening. Cat B Got More Quota and Didn't Budge. Here's Why.

The short version: Cat A gave back $3,000 last round while Cat B moved less than a thousand — even though Cat B is the category that just received more supply for August–October. That looks backwards. It isn't. The explanation is arithmetic most coverage skips, plus a spread that has quietly collapsed to under $4,000.

First: what "+6.2% more quota" actually means

A 6.2% quota increase sounds like meaningful relief. Convert it into certificates per bidding exercise and the picture changes completely. Cat B goes from about 868 certificates per exercise to about 921 — an increase of roughly 53 certificates.

Now put that against demand. In the last exercise, Cat B drew 1,365 bids for 871 certificates. That means 494 bidders went home empty-handed. Adding 53 certificates absorbs about a tenth of that shortfall. The other nine-tenths are still there, still bidding, still willing to pay.

This is the single most useful thing to understand about quota announcements: percentage changes are reported because they sound significant, but bidding is settled in absolute units against absolute demand. When a category is oversubscribed 1.57×, a marginal supply bump moves the clearing price barely at all.

So why did Cat A soften instead?

Cat A received a quota cut — about 50 fewer certificates per exercise — and still eased $3,000. Supply isn't what moved it. Demand is.

The demand ratio tells the story: Cat A's oversubscription fell from 1.51× to 1.28× in a single round, while Cat B stayed hot at 1.57×. Cat A buyers hesitated; Cat B buyers didn't. That difference is structural, not random:

• Cat A is the price-elastic category. It's the mass-market segment, where buyers are financing-constrained and a $129,000 headline crosses a psychological line. When the number gets uncomfortable, these buyers postpone — and the clearing price falls until enough of them return.
• Cat B is where the discretionary money sits. Premium and performance buyers are far less sensitive to a few thousand dollars on a certificate that already costs six figures. Postponement isn't the reflex; securing the car is.
• The EV shift keeps feeding Cat B. With EVs now 62.4% of new registrations, and anything above 110kW landing in Cat B by rule, a growing share of desirable electric models is structurally routed into the bigger category. Cat B demand isn't having a moment — it's being fed by the market's direction of travel.

The feedback loop nobody mentions: the spread

Here's where it gets self-reinforcing. Cat A and Cat B are now separated by $3,890. Historically that gap has run considerably wider. When it compresses this far, the calculus changes for anyone shopping near the boundary: for the price of a mid-spec Cat A car, a Cat B car becomes reachable.

So some buyers trade up. That's demand leaving Cat A and arriving in Cat B — which softens A further and firms B further, which narrows the spread again. Cat A's weakness is partly feeding Cat B's strength. A quota increase in B has to fight that current before it can move prices.

What this means if you're buying

• Shopping Cat A? The softening is real but shallow, and it arrives alongside a quota cut into the year-end stretch. Treat $126,000 as a decent entry rather than the start of a slide — the supply side is moving against you next quarter.
• Considering Cat B? Don't wait for the quota increase to deliver savings; the arithmetic above says it largely won't. What you do get is the narrow spread — the cheapest opportunity in recent memory to step up to a bigger or more powerful car for a small premium over Cat A.
• Right at the boundary? This is the moment to run the comparison properly rather than assuming Cat A is the value play. On a total-cost basis, with the gap under $4,000, the Cat B car frequently wins.
• Renewing? August's PQP is $125,646 for Cat A and $127,835 for Cat B — both now sitting below the live Cat B auction price. The three-month average is still digesting July's highs, which currently works in a renewer's favour. Our PQP forecaster shows what the coming rounds must average to move it.

What would change this picture

Cat B only softens meaningfully if demand cracks, not if quota nudges upward — so watch the demand ratio rather than the announcements. A Cat B reading that falls under about 1.25× would be the first real signal. On the Cat A side, watch whether the softening continues into the 5 August round: two consecutive easing rounds on a cut quota would suggest genuine demand fatigue rather than one round of sticker shock.

We publish both ratios on the COE page every round, including the history table — it's the fastest way to see which of these two forces is winning.

Figures from LTA published bidding results and quota announcements. Analysis is general commentary, not financial advice.