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    The Obscure Traffic Rules Helping Tesla Conquer Shanghai

    What looks like a loophole in the city’s vehicle registration system is in fact an example of how city officials leverage minor regulations to effect big changes.

    “Congratulations on becoming a Tesla owner and thank you for joining us as we accelerate the world’s transformation to sustainable energy.”

    That was the welcome message the Tesla staff gave me when I finally picked up my new car late last year. It’s a nice sentiment, but it’s not why I finally caved and bought the car. Nor was I swayed by Elon Musk’s swaggering social media pronouncements. In fact, the deciding factor had nothing to do with Tesla at all. I had been driven to the decision by a maze of new traffic rules implemented by my city of residence, Shanghai. Standing at the forefront of a nationwide push toward new energy vehicles, the city has unveiled an array of new regulations in recent years to “green” its roadways — even if that means pressuring residents to buy new cars long before our old ones need to be replaced.

    The primary lever at the city’s disposal in this campaign is its licensing system. Unlike Beijing, which has long boasted notoriously strict license plate-based restrictions on private vehicles, including limits on which plate numbers are allowed on the roads on a given day and an outright ban on non-local vehicles during workdays, Shanghai generally has more lax restrictions, even on out-of-town drivers.

    As a result, like many Shanghai residents, I’ve spent the past few years driving a car licensed elsewhere in the country. My reason for not using a local license plate is simple: It's too expensive. It’s a problem faced by urbanites around the world: New York City’s streets are clogged with cars registered out of town or even out of state to duck sales taxes and other fees.

    Even by those standards, however, Shanghai represents an extreme case. As traffic grew out of control, the city implemented a license plate auction system for new passenger cars in 1994. By 2013, the price of a local license plate had risen to 90,000 yuan (about $15,000), where it has stabilized over the past decade. Residents jokingly refer to the city’s narrow blue license plates as “the most expensive piece of tin in the world.”

    Even if you want to abide by the rules, it’s hard to justify spending the equivalent of a cheap domestic car on two flimsy pieces of metal. Besides, for years, there was practically no difference between driving in Shanghai with a local license plate and an out-of-town one. The only exception was that non-locally registered cars were banned from city expressways downtown during weekday rush hours. Since I don't drive to and from work every day, it made more sense to register my car in another city for next to nothing.

    Still, over the years, the inconveniences began to add up. The city has invested heavily in new urban expressways, including elevated roads and underground tunnels. Then, in late 2020, traffic officials extended the definition of “rush hour” to any time between 7:00 a.m. and 8:00 p.m., effectively closing the city’s best roads to cars with out-of-town plates.

    Given the situation, and the need to occasionally drive in my city of residence, I started thinking about getting a local license plate, even if it cost an arm and a leg. The problem wasn’t purely financial, however, because a Shanghai license plate costs more than just money.

    Indeed, there are so many people willing to pay almost six figures for a Shanghai license plate that the Shanghai International Commodity Auction Company, which runs the license plate auction, has little incentive to make the process user friendly. Want to participate in the auction? Sure, but first you’ll need to pay a deposit of 1,000 yuan, which gives you six opportunities to bid. For each auction you participate in, a fee of 60 yuan is charged to the deposit; if you fail to secure a plate within six months, your account is void, meaning you’ll have to reapply.

    The auction itself is held online on the third Saturday of every month. About 150,000 people participate each time. You start by bidding under the so-called warning price given by the system, which registers you for that auction. After that, you have two more chances to bid, though you can only raise your offer by 300 yuan each time. Then, after 59 minutes of inactivity, you join a mad dash of more than 100,000 people over the auction’s final minute, as each of you tries to hit the right price at just the right time.

    Understand? If not, you’re in good company. I participated in the online auction six times and walked away with nothing more than a headache. Of course, that’s normal in a system where no more than 6% of participants win their bids.

    Meanwhile, Shanghai kept getting tougher on cars with out-of-town license plates. Starting last May, out-of-town vehicles were banned from all surface roads downtown every weekday from 7:00 a.m. to 10:00 a.m. and again from 4:00 p.m. to 7:00 p.m. As somebody who lives downtown, this effectively rendered my car useless.

    Desperate, I decided to bring in a professional. Known as a “proxy-bidder,” this new, uniquely Shanghai profession was born out of the city’s convoluted license plate auction system. Theoretically speaking, what they do is illegal, but that hasn’t stopped proxy-bidders from offering their services to anyone with the money to pay. It’s now widely accepted that your chances of getting a local license plate are close to zero if you don't hire a pro.

    Through a friend, I got in touch with a self-described “gold-level proxy-bidder.” He assured me his company had the most professional auctioneers, with a wealth of practical experience, access to enterprise-class fiberoptic broadband internet, and use of proprietary “big data” that helped improve their winning bid rate. As for how much it would cost, he promised to give me a “friends & family price” of just 10,000 yuan if he succeeded.

    Not seeing many other options, I put down another deposit and entrusted my account to this “proxy-bidder.”

    But there was another route I was beginning to consider: buying a new car.

    According to Shanghai regulations, residents who buy a car classified as a “new energy vehicle” are allowed to register for special local license plates. These are green instead of blue — and, more importantly, completely free.

    In theory, what looks like a loophole actually reflects the city’s commitment to meeting China’s ambitious green energy and carbon reduction targets by pushing drivers to buy electric. Last March, Shanghai announced that pure electric vehicles should account for 50% of new vehicle purchases by 2025 — a goal that will surely be made easier by the existence of a nearly 100,000-yuan surcharge on non-NEV license plates. And early returns suggest the ploy is working. After the new restrictions on out-of-town license plates began to come into effect in November 2020, sales of new energy vehicles in Shanghai skyrocketed. Over the ensuing half year, NEVs sold at nearly twice the rate of the previous 11 months, and the city consistently led the nation in NEV sales.

    But while the goal may be noble, the speed with which it is being carried out can lead to inefficacies and waste. My old car, for example, still runs fine, and if it weren’t for the license plate restrictions, I could have used it for years to come. That’s one reason I continued to pin my hopes on the auction.

    As the months passed, however, my bids never won. I don’t blame the proxy-bidder; I even feel a little guilty. He took the failures hard: my bad luck became a source of professional embarrassment.

    In the end, I saw no way out but buying a new car. Even then, however, I wasn’t interested in Tesla or another fully electric vehicle, preferring instead to buy a fuel-electric hybrid that would be easier to use in the absence of conveniently placed charging stations.

    But thanks to another new policy introduced last year, for a hybrid car to qualify for free green license plates, the owner first had to provide documentary proof that their neighborhood or unit could install charging equipment. They also had to be able to show that they were charging the car at least four times a month, or their green plates would be automatically canceled.

    Again, it’s a smart rule. The government knows many residents would likely buy hybrid cars to get the free license plates, then use them like fuel-powered vehicles, defeating the entire purpose of the policy.

    My proxy had struck out, and my backup plan was off the table. Finally, a sudden price cut announced by Tesla — a company that has worked closely with Shanghai in recent years on manufacturing projects and has built up a dense network of charging stations in the city — convinced me to just get it over with.

    That’s how I found myself in a Tesla store putting down a deposit on a car I neither wanted nor needed. For his part, the clerk assigned to me seemed as unexcited to take my money as I was to give it.

    “We have too many people interested in this car,” he said blandly. “You’ll have to wait about two months to pick it up.”

    I gave him a weak smile and looked out the window and onto the street. It seemed like every passing car had a green plate.

    Editor: Kilian O’Donnell.

    (Header image: A man stands beside a Tesla in Shanghai, Jan. 8, 2021. The car’s green plates are much easier to register for than the blue plates given to non-NEVs. Gao Yuwen/People Visual)