The price of private vehicle license plates in Shanghai soared to a three-year high of 48,855 yuan ($7,544) on June 18, rising 1,155 yuan from May's figure amid worries over tighter rules on car ownership.

The rise is well within market expectations as strong demand surpasses supply, despite local government efforts to raise plate offers to 9,000 this month, industry insiders say.

A total of 22,474 people participated in the bidding process, compared with 25,208 in May.

The introduction of a policy to limit vehicles with out-of-town plates fueled the need for local licenses, said Xu Zhidong, a sales head at Shanghai Volkswagen Automotive Company who oversees about 200 sale spare part, after-sale service and survey stores nationwide.

"The market has reached a dynamic equilibrium," Xu told China Daily.

"The huge user base has kept the upward momentum for car sales. Sales have been brisk in our company over the past three months."

An automobile analyst in a leading securities company who would only give his last name as Feng attributed the price surge to widespread expectation of a bullish market in car plates.

"First-tier cities like Shanghai and Beijing are expected to further tighten the grip on managing traffic congestion. Motorists therefore tend to value the scarcity of car plates and avid buyers will make their bid as soon as possible," Feng said.

Car sales reported a 3.98 percent drop to hit 1.38 million in May nationwide, Feng said. But that failed to reflect the booming market performance in Shanghai, Feng said.

"The average disposable income of Shanghai residents ranks the highest, which means potential buyers are less likely to be affected by the soaring oil prices," Feng said.

Alon Ho, product manager of Changtec Co Ltd, a major supplier of window films to Volkswagen, forecasts a steep rise in plate prices over the coming months because of the halt of subsidiary policies and the restoration of Japanese car supply chains.

"After their extensively damaged production facilities are restored, Japanese manufacturers will start to provide cars in a stable manner," Ho said.

"And to reboot sales, vendors are likely to offer preferential packages."

Private car plates in Shanghai were said to be the one of the most expensive in China. The highest price topped at 56,042 yuan by the end of 2007. The lowest bidding price appeared at the end of last year, with average prices sliding to only 15,970 yuan.

Many potential car buyers are still very willing to bid for a car plate to avoid paying more in the future.

"I think the prices will increase further in the future, so I'm better off getting a plate now," said Hao Zhen, a white-collar worker planning to buy a car this year.

Some people are also trying to obtain a car plate outside Shanghai. According to the road administration department, cars from outside Shanghai are not allowed to enter certain roads during peak hours. Violators can be fined 200 yuan.