Ever since number one sold for Dh51.4 million in 2008, the intriguing world of plate auctions has caught the public's attention.
The man who spent Dh10m on a licence plate
Instead of a gavel, he wields a golden pen. All eyes are drawn to the auctioneer as it gleams above his head amid spotlights and lasers. "Thalatha … ethnein. Mabrou …" "Dh10 million!" the gentleman in the front row screams, stopping the countdown with a last-second bid. The boom of drums and an explosion of chatter ripple through the auditorium at Emirates Palace in Abu Dhabi. The attention of the audience immediately shifts to his rival in a grey suit, also in the front row. He sits hunched with his face buried in his jacket, concealing the microphone to a wireless headset. The audience waits with anticipation as he whispers to an anonymous bidder on the other end of the phone. More than 10 minutes of furious bidding have come down to this moment.
"Thalatha … ethnein …" the auctioneer pauses. "Mabrouk!" The golden pen comes down. A round of applause fills the hall as the winner collects his prize - a black briefcase. But inside is neither diamonds, gold nor rare art. It's a thin piece of aluminium bearing the number nine. "Some people focus on horses, stocks and others on cars," says Ahmad Ahli, an investor from Abu Dhabi and the owner of the prestigious plate. "I came to this auction specifically to buy number nine."
Last Saturday, Emirates Auction hosted its latest licence plate sale. It was an astonishing scene watching hundreds of thousands of dirhams being spent with the flick of an auction paddle, galaxies away from a world still struggling under the weight of the financial crisis. After number nine reeled in an incredible Dh10m, plate number 19 fetched Dh3.35m. Number 77 came in at a close third with Dh3.3m, while the cheapest plate, 6444, went for a mere Dh50,000. By the end of the night, every one of the 81 lots were sold off for a total of Dh30m.
In association with Abu Dhabi Police, Abu Dhabi Islamic Bank and Emirates Palace, these numbers were the latest batch released by the Government, with the proceeds going towards the building of the Middle East's first rehabilitation centre for victims of car accidents. Of course, in the UAE, the wheeling and dealing of licence plates is hardly a new attraction. Since May 2007, Emirates Auction has held 22 sales in Abu Dhabi, while in Dubai the Roads and Transport Authority (RTA) has hosted 66 gatherings for its "distinguished number plates". In February 2008, the phenomenon attracted international interest when Saeed Kouri famously bought number one for a record US$14m (Dh51.4m), commenting that he purchased the plate "because I want to be the best in the world".
Indeed, more than anywhere else in the world, the number on the back of your car matters, indicating hierarchy, status and wealth. But the strange and high-flying world of UAE licence plates has evolved in recent years. Mr Ahli has no intention of installing this recent acquisition on the back of a Lamborghini. Instead, he and a team of three other investors are serious players in one of the more unusual commodity markets in the world.
"There is now a secondary market that we are monitoring," says Abdulla al Mannaei, the managing director of Emirates Auction (http://ad.emiratesauction.net/english/Auction_Alert.aspx). "We want to make sure it's done properly. If you push and flood the market, it will reduce their value and price. We want to keep it efficient for business." In other words, Emirates Auction carefully releases the elite plates onto the market to control price and demand. Auction times are sporadic and only announced a week or two before the event takes place. Prospective investors must constantly monitor the website or rely on word-of-mouth if they wish to participate.
In the beginning, Mr al Mannaei says these plates were bought mostly for prestige. However, as the auctions grow in popularity and the market continues to mature, the exclusive licence plate numbers are now being seen as valuable investments that will appreciate over time. Like silver and gold, scarcity and demand have pushed the value of the plates to dizzying heights. While Mr Ahli has been attending these auctions for several years, he says this is the first time his team of investors has ventured into single-digit territory. It represents a risk and considerable investment, but he has plenty of experience selling to collectors. Recently, when he purchased number 66 for Dh1m, Mr Ahli says he turned it around several months later for an impressive Dh4.3m, pulling in a substantial return.
Not everyone in the auditorium is chasing the big-ticket items. Khalid Sayeed al Ghabri, another investor from Abu Dhabi who works in the building and hospitality industry, is sitting in the back row, patiently ticking off each lot as it's sold and recording the price on a chart. Mr al Ghabri is gauging the market. In the past year, his buying has increased because of reliable returns and now he sees the licence plate market as a secondary income.
"This is something I do as a private business for myself," he says. "I buy them with the intent to sell, usually through the internet or through ads in newspapers and print." His next step is to post the numbers online, such as the souq section of dubaimoon.com. The more expensive plates he'll generally sell through family, friends and colleagues, relying on reputation and networking. The mark up, he says, will vary based on the buyer and number, but he aims for a minimum of 5 per cent profit. This time around, he has purchased three plates, including 31111 for Dh90,000 and 33331 for Dh65,000.
The pattern is not a coincidence. Mr al Ghabri says he came to the event seeking certain types of numbers that he believes will sell. Sometimes he knows what kinds of numbers his clients are interested in. Other times, he simply bids on a hunch. Buying plates that will increase in value is a tricky business, not unlike the stock market. The price can be determined by the most random of factors. Perhaps it's the bidder's lucky number, a birthday, or an anniversary. Any of these coincidences and forces of nature could suddenly drive up the cost. But behind the randomness is also a more sophisticated science. In Abu Dhabi, seven series of licence plates have been released over the years, with a number or colour representing each generation.
However, the series is not necessarily in sequential order. For example, this latest series has the number six written in red on the left-hand side. Dubai has a similar system, but plates are classified by letters, such has "E", "H" or "M". Generally, the older the series, the greater its value. A number nine from the previous generation, for example, would in theory fetch more among collectors than the one purchased at last Saturday's auction.
Repeating numbers are also coveted when determining value. The vast majority of investment-quality plates for sale typically have at least three identical digits. But what makes this principle particularly special is when the series number echoes the numbers on the plate. For example, at last Saturday's auction, 616, part of series six, attracted a Dh400,000 bid. Lower numbers, such as 134, 120 and 109, received lower bids at Dh240,000, Dh370,000 and Dh240,000 respectively.
That said, all else being equal, most buyers agree that the most basic and fundamental factor determining value is fewer digits. Repeating numbers might be unusual, but with millions of cars clogging the streets, a low number carries an elite status that rises above the crowd. That's the philosophy of Al Tawash Rent a Car in Al Ain, a company whose business model relies on the licence plate market.
Hatem Hejazi, the deputy director, says many of the luxury vehicles sitting in the company's lot - from a Lexus, to a BMW, to a Ferrari - are far less valuable than the plates attached to them. The company has gradually built a client base and reputation based on this prestige. "We see these plates as investments because low numbers are so highly in demand," he says. "They are considered more prestigious, and 90 per cent of our customers ask for them. We have a fleet of 400 cars. Those holding low numbers are rented out for higher prices, probably 10 per cent to 15 per cent more than other cars."
He adds that the company is always on the look out for the latest plates from both Abu Dhabi and Dubai. In fact, representatives from Tawash Rent a Car attended last week's auction at Emirates Palace. Mr Hejazi says they have bought dozens of exclusive numbers over the years, such as 933, 927, 266, 143 and 189. With the company having spent millions of dirhams on plates, he insists the investment has been wise. Their clients, mostly Emirati, often expect a lower licence plate because of the elite status they offer, and the product helps Tawash Rent a Car to stand out from other agencies. He adds that the numbers also command a certain respect on the road.
Meanwhile, the elite plates will appreciate as the years pass by. "If you bought a car for Dh500,000, how long will you keep it?" asks Mr al Mannaei, the managing director of the auction. "Probably several years? But if you are smart and buy a valuable plate, you can have it for much longer and it will not decrease in value." Mr Ahli is certainly convinced. As he's done many times before, he collects the black briefcase and opens it, inspecting the Dh10m investment. His team of investors crowd around him and they take pictures of their prize.
"Everybody has a hobby," he says, closing the case with a click. "But for me it's a business. I'll find someone who wants number nine." firstname.lastname@example.org