The 34-year-old is one among many car enthusiasts in the city for whom the high price of a car licence plate and limited access to cars produced outside Shanghai has proved prohibitive.

So Liu was very happy last week, struggling his way through a packed and joyful throng, to be able to attend a licence plate auction that represented a major departure from previous policy.

The auction was the first in the city ever to take place without a set starting price for plates, and also the first to offer plates for vehicles from outside Shanghai without high charges.

High cost of a car

Terrible traffic congestion and pollution had led to restrictions on the number of cars in Shanghai which were enforced by limiting access to car plates. Last year people had to start bidding for a Santana or Buick car plate at a minimum of nearly 20,000 yuan ($2,400). Locals used to pay up to 98,000 yuan ($11,800) for a registration plate for a domestically made car if the plate was not bought at auction.

There were only about 8,000 car owners by the end of 1999 in Shanghai, while in Beijing there were 350,000 and the figure is going up all the time.

"This auction is great for me. I can now pick up good cars made in Wuhan, Changchun or Guangzhou," said Liu.

From now on, people can get a car plate without base price and are also free to buy cars from outside Shanghai. The new policy is expected to see 1,000 car plates auctioned every month this year.

Domestic car makers and retailers are also happy with the easing of restrictions.

"Shanghai is opening the door wider to outside players and I think this is the right time to map out marketing strategies to woo potential buyers," said Lu Xingbao, a sales representative for selling cars made by Changchun-based First Automotive Works, a leading car maker in China which sells big names like Audi A6 and Jetta.

Stand to gain

The Fukang-Citroen sedan, made by the Sino-French venture Dongfeng-Citroen in Wuhan, capital of Hubei Province, also stands to benefit from the changes. The sedan is the main competitor of the Santana, with about 6.56 per cent of the domestic passenger car market in 1998, while the Santana chalked up 46.24 per cent.

"Shanghai is the economic centre of China and its car market has some of the biggest potential in China, especially in the wake of more buyer-friendly policies," said Ge Guowei, a fran-chised sedan retailer. Nearly 200 sedans were sold in Shanghai last year and this year the showroom expects to shift 500 in the city.

But it will be no easy contest for cars from other parts of China entering the Shanghai market, according to Shen Rongxing, a local auto expert.

"Cars like Jetta and Fukang-Citron are not such familiar names for locals and most people will still rank Santana as their top choice.

Better placed

The owner of a locally-made car is also better placed for after sales service than someone with a make from another province," he said.

He conducted a sample survey of the people at the recent auction show and found that nearly 70 per cent of those polled would still opt for the Santana. The auction was packed with nearly 2,580 people.

As Shanghai allows for a thaw in its icy relations with other car manufacturers around the country, it is expected that other provinces will follow suit.

Shanghai's regional protectionism had sparked a war with Hubei Province, which resorted to slapping a retaliatory 70,000 yuan ($8,500) tax on people who bought Santanas.

Authorities from Hubei Province are now indicating that they will consider dropping the tax.

"We welcome the new policy. Hubei authorities will hold a meeting to discuss the cessation of the tax as soon as possible," said Cui Zhenzhang, an official with the Automotive Industry Administration Office of Hubei Province.