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October 20, 2013

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Car plate prices rise after upper limit removed

Shanghai car plate prices rose for the first time in seven months at auction yesterday, after a price ceiling on first-round bids was removed.

The average price of a Shanghai license plate yesterday was 83,723 yuan (US$13,635), said auction organizer Shanghai International Commodity Auction Co.

This figure was up 10,231 yuan — just under 14 percent — on last month.

This hike is well above the 6 percent increase that triggers a two-month price ceiling.

Prices had been dropping since April when a price ceiling mechanism was introduced to curb speculation. 

In the months that followed, this policy brought the average price of a Shanghai car plate from a record high of more than 90,000 yuan in March down to 73,492 yuan last month.

But back in March when announcing the upward limit, the municipal government made it clear that it preferred to use the market’s own forces to cool market hype.

So under rules announced in August and introduced yesterday, the price ceiling is now only triggered by steep price hikes.

An increase of between 3 and 6 percent will lead to a price ceiling being imposed on the following month’s bidding, while a spike of more than 6 percent will result in a two-month imposition.

As yesterday’s rise in the average plate price was more than 6 percent, for the next two months a price ceiling will now be imposed for the first round of bidding.

The upward limit will be set at 74,900 yuan — the weighted average of average prices in September, August and July.

Xiao Yan, a car dealer in Shanghai, said the price rebound was predictable, as expectations of an increase were high before auction, making the actual price increase a self-fulfilling prophecy.

To ease market worries of big price hikes, the government said an extra 1,000 car plates would be added to the usual number of 9,000 at yesterday’s auction.

However, the number of auction participants dropped 18 percent to 28,887, even though it is the peak season for car buying. 

“Quite a few would-be buyers chose to wait until they can see the price trend more clearly,” said Xiao. 

The price ceiling is just part of measures introduced by the government to rein in plate prices.

To make it more difficult for scalpers to cash in, secondhand car plates cannot sell at a price higher than the latest average price for a new one, while the minimum holding period before a new car plate can be resold is to be strictly enforced.


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