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Car sales may get boost from tag supply rise

SHANGHAI will offer an extra 500 car plates at this month's auction, the most so far this year, in an effort to help spur the flagging automobile market.

A total of 6,500 private license tags will go under the hammer in the monthly auction on April 18, compared with 6,000 in March and 5,200 in January and February, the Shanghai International Commodity Auction Co said yesterday.

Bidders can register for the Saturday auction at five local outlets from April 11 to 17.

The expanded quota is designed to stimulate the city's car sales, Mayor Han Zheng said. It also follows a central government plan to boost the automobile industry. Because of the world economic slowdown, auto sales in China suffered the lowest growth rate in a decade last year, with a 6.7 percent gain. In 2007, growth was 21.8 percent.

Tax break

The central government has announced a series of measures to boost vehicle sales, including a tax break on small cars and subsidies for farmers who replace their outdated vehicles. Those incentives helped expand China's vehicle sales 25 percent in February to 827,600 units.

In an industrial rescue package announced in mid-January, China also called on local authorities to scrap restrictions that restrain vehicle purchases.

Shanghai is the only city on the Chinese mainland that issues plates by auction, a system set up in 2000. The aim is to restrict the rapidly expanding number of vehicles and, in the process, ease traffic congestion and reduce energy consumption and pollution.

In addition, some 3 billion yuan (US$450 million) raised by the auction is spent annually on public transport construction, according to the government.

But the auction has also been criticized because it adds substantially to the cost of buying a car.

Huang Rong, director of the Shanghai Urban Construction and Transportation Commission, said earlier that the action will be abolished when the public transportation system is improved. But a timetable has not been disclosed.

Dealers said this month's larger quota should lower car plate prices and boost sales.

The average price for a car license dropped 5,842 yuan to 27,552 yuan last month. The lowest price was 26,600 yuan, down from the 33,000 yuan in February. Both prices were the least since December.

"It makes no sense to auction car plates to ease Shanghai's traffic burden," said Yang Xiaochen, a local driver. "Shanghai car buyers can register in other provinces; it only takes a little trouble to save a lot."

Tags can cost as low as 2,000 yuan in neighboring jurisdictions.

Shanghai road authorities, meanwhile, worry about the effects of lifting the auction system and selling plates to everyone who wants one.

"We will stand by the national policy to stimulate the car industry; however, we hope the local government will act moderately when loosening the curbs," said an official with the Shanghai Highway Administration, who spoke only on condition of anonymity. "Shanghai has a delicate road situation, and a sudden influx of cars could cause chaos."


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