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Auction prices for car license plates in Shanghai soared at the weekend ahead of the nationwide implementation on April 1 of a consumption tax law that targets luxury goods including high engine-capacity vehicles.

More than 10,000 people bid for 4,500 private car plates at the auction on Saturday, at an average bid price of 38,932 yuan (US$4,806), the highest since last April and 4,000 yuan (US$500) more than last month's prices.

Shanghai is one of the few Chinese cities that limit the number of vehicles on the road by making buyers bid for a fixed number of car license plates.

Starting bids were as high as 45,500 yuan (US$5,700) last April because of the limited number of plates available. The quota was increased after, and prices have stabilized around 30,000 yuan (US$3,750).

Since the central government announced its decision to raise sales tax rates for cars with large capacity engines to cut energy consumption and encourage the use of more economical cars, sales of big cars have largely stagnated.

The new tax policy will increase the price of luxury cars such as a Mercedes Benz by 100,000 yuan (US$12,500), Chen Shuyang, a worker at Shanghai Dexing Automobile Sales Company, one of the three authorized Mercedes Benz sales outlets in Shanghai, told China Daily yesterday.

"For the moment, customers who can afford to buy a BMW or Mercedes Benz aren't too concerned about the price of license plates," Chen said. "But we predict that the market will cool down after April 1."

"Most of my friends who intend to buy domestically produced cars for about 100,000 yuan would want to have their vehicles licensed outside of Shanghai to save money on the plates," Chen said.

Another auction has been scheduled for April 15.

(China Daily March 27, 2006)