Shanghai puts cap on license plates

The costs of car license plates in Shanghai increased by more than 10,000 yuan ($1,600) in the city's latest auction, forcing the government to put back a price ceiling for the next two months.

The steep surge, coming after the government scrapped the price ceiling in October, upset many consumers. But experts said the price of plates, dubbed "the world's most expensive sheet iron", will continue rising in the long term, given the growing demand for car ownership and the city's limited traffic capacity.

According to the city's policy on car license plate auctions, a price ceiling will be applied for the following month if the average cost of a plate increases at least 3 percent, and for the next two months if the average cost is at least 6 percent. The price ceiling is the weighted average price for the most recent three months.

Because of the price cap set after a record price of more than 90,000 yuan in April, the costs of Shanghai's car license plates continued to fall in the past six months. After the price ceiling was scrapped in October, the suppressed demand pushed the average cost of a plate to about 83,700 yuan during this month's auction on Saturday, a surge of around 10,200 yuan from September.

Even the lowest price stood at 82,300 yuan, an increase of 8,900 yuan from the previous month.

Scrapping the price ceiling is widely believed to be the cause of the rapid rise, as the government actually released more plates for auction and there were fewer bidders this month.

According to the Shanghai Commodity International Auction Co, the authority released 10,000 plates for auction this month, 1,000 more than it did last month. A total 28,887 people took part in the bidding, 6,267 fewer than in September.

The government has decided to restore the price cap of 74,900 yuan for auctions in November and December.

"I don't think the price-ceiling mechanism is working well or that it can suppress the demand for car ownership," said Daniel Dong, a Shanghai lawyer who bid 82,300 yuan for a plate on Saturday with the help of an agent.

It's unacceptable that the price surged more than 10,000 yuan after the price cap was scrapped, he said.

The price of a license plate has almost doubled from two and half years ago. "It's absurd," he added.

Sun Lijun, president of the College of Transportation Engineering at Tongji University, said on Sunday that the steep surge of license plate prices shows a high demand for car ownership.

"Shanghai is becoming increasingly congested, and the price of a car plate should go up," he said, adding that the cost will continue rising in the long term.

Also, other cities are using measures, like charging congestion fees or parking fees, to control the rising demand for car ownership before those cities become too congested.

Beijing introduced the lottery for car license plates in January 2011 to curb car numbers by capping the total number of car registrations at 240,000.

China's southern metropolis of Guangzhou started to allocate the city's annual 120,000 new car registration quota through the lottery and auction models from August 2012.