License Plate Auctions Hurt Domestic Car Companies
Shanghai is one of four municipalities (along with Beijing, Guangzhou, and Guiyang) to have implemented license plate quotas in effort to curb traffic congestion and air pollution. Shanghai, who pioneered the license plate auction in 1994, has seen average successful bid prices climbing over the last year – in March reaching 90,000 yuan, far higher than the city’s annual per capita income – though they did cool slightly this month. Bloomberg outlines Shanghai’s complicated license plate lottery, explaining how the domestic car manufacturers who cater to China’s growing middle class are put at a disadvantage by exorbitant license plate costs:
Shanghai’s busy streets teem with Buicks, Fords, Volkswagens, and Toyotas. More than 9 out of 10 cars in the world’s most populous city are made by foreign companies, and it’s not just a reflection of mainlanders’ preference for Western design. Some local automakers say the city’s license plate auctions are responsible for their weak sales. Shanghai is one of four Chinese cities that limit car purchases by imposing quotas on registrations. The prices paid at Shanghai’s license auctions in recent months—90,000 yuan ($14,530)—have exceeded the cost of many entry-level cars, the stronghold of Chinese brands such as Chery, Geely, and Great Wall. While residents with modest incomes may be able to afford an inexpensive car, the registration cost is often beyond their reach. “Whenever there’s a restriction of new car purchases through the quota system, there is always a big impact on lower-price cars like the ones we make,” says Lawrence Ang, executive director of Geely Automobile Holdings (175), whose Panda minicar sells for 37,800 yuan.
After Beijing (pop. 21 million) introduced a license plate lottery in January 2011, the combined share of Chinese brands sold there plunged by more than half, to 9.7 percent for the year, according to researcher IHS Automotive. In Shanghai, which began auctioning license plates in 1994, domestic brands made up only 8.9 percent of cars sold in 2011 (the most recent data available), less than a third the level nationwide, IHS reports.[…]