The Shanghai local government will greatly reduce the number of private car license plates it puts on auction this month, but that might not push plate prices significantly higher.Industry insiders say the government is cutting its quota due to sluggish car sales.

The government will sell 3,800 license plates at auction on February 26, according to Shanghai International Commodity Auction Co, which organizes the city's private auto plate bidding every month.

This is the smallest license plate quota since July 2003 and the number of plates on sale this month is down about 30 percent from last month.Government officials wouldn't say why they slashed the number of plates for sale.

"February is always a slow season for auto sales as people enjoy a weeklong holiday, so the quota is not too small regarding the stagnant market," said an auto dealer surnamed Cai.

Those planning to buy a private car in the city must first buy a plate at monthly auction, as the government tries to control the number of new cars on city streets.

Last year, the government sold off 66,800 private plates - an average of 5,566 plates every month - and 132,582 people bid on plates.

Large demand sent the prices as high as 45,492 yuan (US$5,481) a plate in April last year, almost equalling the price of an entry-level car.

While the number of plates on sale this month is down from January, it doesn't mean prices will necessarily rise as the number of bidders may also drop this month, Cai predicted.

Automakers in China sold 194,907 passenger cars in January, down 26 percent from a month earlier.)

Source: Shenzhen Daily