Shanghai Car Plates IS Investment

I have a car with name of Goudaner.

However, I don’t have a car plate from Shanghai, simply because it is too expensive. Instead, I drove 200 km away to Hangzhou (the capital of Zhejiang Province, south of Shanghai) to register my car there.

Now I am a Shanghai driver, bought a car in Shanghai, driving in Shanghai… with a Hangzhou car plate. Sounds wired, isn’t it?

I thought I made a right decision three years ago. Now? I don’t think so.

The History of the Decision

In August 2003, you need to give government 38,500 RMB to get a car plate. In March 2004 (seven months later), it costs 43,000 RMB. In May 2004, the price dropped for the first time to 34,226 RMB, then to 21001 RMB the next month. I didn’t track the price of car plate since then.

Comparing to the high price of a Shanghai plate, to register in other city is attractive. It is almost free.

There are some limitations for these cars (there are 130 thousand cars running in Shanghai with outside plates), and more and more fees are added to these cars. Beside that, I need to drive my car personally to Hangzhou for annual checking which is not always pleasant journey.

Car Plate as Investment

With the explosion of number of cars in Shanghai, the recent bid result for car plates keep going up and is always above 40,000 RMB. I thought it has nothing to do with me any more, until I chatted with Jia about his experience to attempt sell a car.

When it comes to a point that you need to sell your car, the different is huge.

For cars with Shanghai plate, the plate is still a lot of money – according to the current bidding price for the plate. For most people, they can make some money because of the price difference.

For cars with other plates, the plate itself worth nothing, even lower the price you paid to get it. Meanwhile, since the car transaction involves transportation administration of another city, there are additional 3000 RMB for this.

So, the conclusion is clear:

1. To register outside Shanghai is cheaper, until you sell it.

2. To register in Shanghai is more expensive, until you sell it.

My Conclusion

This teaches me a basic economic rule: when we buy something, always distinguish whether it is debt, or asset. By the definition of Poor Dad, Rich Dad, debts are something to take money out of your pocket, and assets help to put money into your pocket.

When we make decision about a deal, we should look at the both side of the equation. Take the Shanghai Car Plate or house example, you pay money on the left hand, and get some asset on the other hand, so you are still balanced in your Balance Sheet. To get a plate out of Shanghai, although on the left hand, I didn’t pay too munch money, on the right hand, I got nothing (not an asset). This is not a good idea.

P.S. It is not so fair to say I made a wrong decision since at that time, everyone was expecting the cancellation of the plate bidding in Shanghai. If that is the case, the asset disappears in a day.

15 thoughts on “Shanghai Car Plates IS Investment

  1. james

    Actually, I am at the moment in the process of obtaining a second-hard car. The car comes with a Shanghai plate, but it’s tempting for me to sell the Shanghai plate and get a nearby plate from SuZhou. I will save 40,000 just by doing so. I live and work in Pudong, so the impact of non-SH plate limitation is minimal to me.

    Jian Shuo, I agree with you SH plate can be considered asset, but the price to obtain the asset need to be considered. I foresee there is a chance the price for plate will drop to around 30K in the near future, is it possible to buy SH plate after you see plate price drop? For your case, now you are driving everyday a non-SH plate car. If next month the price drop to 30K, are you allowed to bid and buy SH plate to put onto your car? thanks.

  2. Jian Shuo Wang

    @james, thanks for your comment. In my personal opinion (well, this is just what I think because my own experience, and you don’t necessarily agree), Shanghai Car Plate is an assert, although this assert has huge uncertainty. It may increase dramatically or worth nothing, just depend on the new issue of a policy.

    The decision about whether to sell the plate or hold it really depends on your expectation about the price trend of the plate. My guess? It should keep increasing. So you can either get the money today (40K) or get it later.

    I don’t think there is a way to get a new Shanghai Plate when I have a plate already.

  3. Simon

    Car plate investment may be good. Bu if you sell it to others, the government will grab a high tax from you, so there’s no profit.

  4. fumade

    I go to work by bike(35mins),sometimes by bus(45mins).

    As a common people in Shanghai,I agree with govenment’s high price policy. It helps to restirct the amount of personal car. In my opinion, personal car is the primary cause of the horrible traffic.

  5. stephen

    So your asset is intangible and the value of the title is determined by the policy maker, this is not an investment but a direct payment to the government.

  6. Jian Shuo Wang

    @stephen, the point is, someone else are willing to pay the same price to get the plate, so it worth something. I do agree this assert is highly unpredictable.

  7. Rick

    The Shanghai car plate is not an asset. Here’s my reason:

    (a) You pay a “big” amount of money to buy the car plate. Under these condition you can make money out of it: (1) the car plate biding price keep rising, and fast enough to balance inflation; and (2) you decided to sell your car, and not driving again. Otherwise, you get nothing from this payment.

    Your risk and cost: (1) car plate biding price will not rise all the time, policy change can substantially change the value of it.

    (2) You lost the opportunity to invest that money into other more secure, higher return assets.

    (b) Instead, you use part of that money (equal to the amount to acquire a Shanghai plate) to register a car at nearby city, and put the other part of the money into some real investment asset. Let’s analysis this option. Real investment asset could be house (assume you can buy a tiny apartment and someone wants to rent it),stock, bond, or simply bank deposit (If you lucky enough to find a “stupid” bank willing to pay you higher interest rate than inflation rate.) If any of these choices yield extra money that can cover inflation, also cover the expenses related to a non-Shanghai plate (not including the compensation for a non-pleasant feeling at HZ for renewing you plate cause it is hard to measure the value of feeling), then you generate a positive cash flow out of your money. That’s an asset!

  8. Jian Shuo Wang

    @Rick, I don’t agree with you on that.

    For (a) (1) Whether it is an asset has nothing to do with inflation. You can claim that it is not a good choice to own this asset than others (which I tend to agree), but it does not mean this is not an asset. In contrary, to get nearby plate is purely cost.

    For (a) (2) It is the same as every asset. For example, if you buy an apartment, you get nothing (extra) for your payment until you sell it. As long as you live in that apartment, you cannot cash out. It is the same as the car plate. Although it is unlikely that I will sell my plate (since I will be driving), it is still asset.

    For the other (2), it is again the same for any investment. If you put money into this, or house, or stock, or bond, you lose other opportunity. I won’t argue that investing in plate is the best (I really don’t think so), but it is still 1) an asset, 2) an investment.

    For the (b) part, your idea makes perfect sense. The risk of car plate investment is, it may go up in the future (very likely), or go down even to nothing (if the policy opens up). It is the same as house, and more risky, the stock.

  9. stephen

    Is there people actually hoarding up these Shanghai plate for spectulation purpose? Wonder what happens if authority announced these plate to be non-negotiable.

  10. Jian Shuo Wang

    @stephen, some car dealer do something similiar to that, but they only hold it for a very short period of time, like one month or two, and charge the new car owners extra money so they don’t need to go to the bidding process.

    but I don’t think there are any one who can hoard plate, since the plate has to be put on the cars and you have to pay very high tax and fees every year after you get the plate. It is not a feasible way to hoard it just for sake of the increase in price.

  11. RWM

    Actually I heard that the government might be changing the rules…

    With everyone buying out of Shanghai plates, the local government is losing out on the regular monthly road maintenance fee, as well as apparently the tax that the consumer pays on the vehicle purchase.

    So supposedly they are going to introduce a ‘cheap’ local Shanghai plate, which wont allow you to drive on certain roads at certain times… but it is for Shanghai. Price around 10,000 RMB.

    Take the rumor with a grain of salt ?? Who knows the reality :-)

  12. Jian Shuo Wang

    @RWM, it is true. There are proposal of issuing X plate in Shanghai. Even if it happens, it does not touch the high price of regular Shanghai plate. There are possibility that the bidding process will be completely removed.

  13. Daniel L Hof

    …i enjoy your site. Very professional and also informative. I look forward to my trip next month to Shanghai.

    Sincerely,

    Daniel

  14. Daniel L Hoff

    …I apologise for the lack of respect for the time differance…for I just realized such.I am at (MST-Z)

    Thanks,

    Daniel

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