One model is selling for twice the cost of a brand new automobile

BEIJING - A second-hand Volkswagen Bora is on sale in Beijing for 210,000 yuan ($32,308), more than double the price of a new model, because of strict limits on car purchases in the capital.

The potential market has been created by buyers unwilling to enter the lottery to buy a new vehicle. A second-hand automobile will likely have already been registered with a Beijing license plate before the policy was launched on Dec 23.

Customers examine the engine of a second-hand car at a Shanghai second-hand automobile market. Because of strict limits on car purchases in big cities such as Beijing and Shanghai, the prices of some second-hand cars are soaring.?[Photo/China Daily]

The move comes amid a growing shortage of registered used cars in the city and, paradoxically, falling prices for many of them.

"The question is, who is willing to pay more than 100,000 yuan just for a license plate, especially when the car is less expensive than 100,000 yuan?" asked Ma Zhuo, an analyst with a new energy research center under a State-owned enterprise in Beijing.

"The situation frustrates me. I need a car urgently because my office is being moved outside Beijing's South Fifth Ring Road this month," said Ma. "I can't rely on being lucky in the lottery created under the quota policy."

The Beijing municipal government said last December that this year the city's traffic authorities will issue only 240,000 new license plates - one-third of 2010's total - to ease the gridlock.

Individual automobile buyers will receive a monthly average of 88 percent, or 17,600, of the plates.

In January, authorities in the capital received more than 210,000 individual appeals for new car license plates during the eight-day application period - about 12 times the monthly quota.

In June, there were nearly 33 applications for each plate available, with the number wanting one rising to 577,856.

"It's a horrible situation and a frequent conversation point for me and my colleagues and friends who need a car," said Ma.

Those unwilling to risk the lottery or who are not qualified to apply for a plate are forced to look for cars registered before Dec 23.

According to Yayuncun Automobile Trade Market, in the first four months of 2011, Beijing sold 60,700 second-hand cars, a fall of 58.8 percent during the same period in 2010.

Overall last year 390,000 second-hand cars were sold in Beijing. The market picked up a bit in May, with sales of 29,700 cars, an increase of 2.4 percent on April, but was still 29.5 percent below May 2010 sales.

"Because winners under the lucky draw policy can only keep their right to buy for six months, some of them who are undecided on the model they want chose to purchase a cheap second-hand car," said Chi Yifeng, general manager of Yayuncun market.

His company's statistics show that in May, 1,600 people used their license permits from the lottery to buy second-hand cars in Beijing, 9 percent of the total 17,600 available for new cars.

Moreover, 74 percent of such second-hand car deals were for models with prices lower than 50,000 yuan, and 61 percent for cars less expensive than 30,000 yuan.

"They just want to spend as little money as possible so they can keep their license and will update the model using their license some time in the future," explained Chi.

He also said another trend emerging from Beijing's second-hand car market is that more drivers are upgrading their cars for second-hand premier-branded models.

"In May, there were 6,600 trade-ins in Beijing, accounting for half of the second-hand car sales," said Chi.

However, as people still need to get the license permit from lottery system for an unlicensed second-hand car, most of them prefer to buy new models. That leads to lower prices for second-hand cars in the Beijing market.

"The average price of second-hand cars in Beijing is now 10 percent lower than that in surrounding areas. Last year, Beijing prices were 10 percent higher," said a dealer surnamed Chen in Yayuncun market.

"The result is that more than half of the second-hand cars we acquired from local citizens have to be sold outside Beijing," he added.