Driving an expensive car, but without the right number plate, takes some of the sheen off the road experience of the owner. Ehab Heyassat investigates why the wealthy and the powerful invest millions to own unique number plates.
There is a nice secondary market for trading licence plate numbers of private cars building up in the UAE where, according to unconfirmed reports, as high as AED28 million changed hands for the possession of a single plate earlier this summer. The secondary market dealers in this trade are not licensed brokers, but wealthy people that have the capacity to purchase these plates in government auctions or in the secondary market and hold those until they find the right price to sell. According to some estimates, Dubai alone has nearly 100 of these traders who are involved in matchmaking - the bid and offer sides and promoting brisk business.
It's no secret that the wealthy have always wanted to differentiate themselves from commoners. According to the most recent Merrill Lynch and Capgemini World Wealth Report, "investments of passion" has become an important portfolio allocation for the 9.5 million high net worth individuals in the world now. The report revealed that luxury collectibles accounted for more than 26 per cent of all high net worth individuals' investments of passion in 2006 across the world, while investments in art followed at 20 per cent and jewellery next at 16 per cent. The Middle Eastern investors, of course, allocated a larger share towards jewellery purchase at 32 per cent.
Participants in the business of investing for passion say that asset allocation patterns among high net worth individuals are significantly influenced by the culture they belong to. And so, people of Middle Eastern descent traditionally prefer gold far more than those in Europe, Latin America and North America, rather than, say, art collecting. Although there is no such category as licence plate investing in the Merrill Lynch and Capgemini report, sources speaking to MONEYworks say trade alone in the UAE of these numbers run into hundreds of millions of dollars every year.
In a country that boasts of 68,000 dollar millionaires and many more half millionaires, the heavy demand for investing in one's passion for unique numbers in licence plates does not come as a surprise, especially when there is an over the counter exit route in a secondary market well oiled by traders and a legitimate means of transferring ownership.
Says one of the traders or dealers of these numbers who identifies himself only with his first name Mansoor: "My experience is that rich people of all nationalities covet these unique numbers as they want to be seen as unique and different from others. One of the advantages of dealing in these numbers is that the deeds of ownership can be transferred legally from the seller to the buyer."
For example, the Road and Transport Authority (RTA) in Dubai is the concerned authority involved in transferring the ownership, while in Abu Dhabi it's the Abu Dhabi police, he adds.
Monsoor not only deals in car number plates, but also in telephone numbers. He told this writer that he had sold his earlier cell phone number at a price of AED3,000.
Says Aqil Abdullah, another passionate investor in numbers, there is a tremendous upside in investing in the number plates of private cars.
Abdallah incidentally broke RTA's record for the highest price paid for a number plate in Dubai. In RTA's auction in March this year he successfully bid for the "E15" number plate paying more than AED3 million. He also told the media, giving an indication of the upside potential to number plate investing, that a number he bought investing AED400,000 a few years ago fetched him AED2.5 million when he sold it recently.
In a country which has traditionally lacked public transportation and depends on privately owned vehicles that are affordable, for the wealthy it becomes almost essential to differentiate not only what they drive, but also what numbers are there on licence plates of the cars they own.
Talal Khouri, a wealthy businessman in Abu Dhabi, became famous in May earlier this year when in 20 minutes he became instrumental in raising the value of the Abu Dhabi private car plate number "5" from a par value of AED250,000 to AED25.2 million. He bought the number at an auction of the Abu Dhabi police and later told the media that he would have paid AED50 million if he had to pay for that number as all the money that he was paying was to go towards charity.
Number "5" is not the only plate that Khouri bought. He has invested in a number of others.
Another dealer, who also identifies himself with just his first name Akram, says that he has seen wealthy people invest millions for the numbers they covet.
The twenty-something Akram explains the rationale behind such investments: "If you are driving a Bugatti which you bought for Euro1 million, you probably aren't too worried about spending another million for a number plate that shows the horsepower of the car 1001."
If that argument holds any truth, then the secondary market for these numbers in the country will only have one way to go, and which is north. The UAE is the fourth largest market for Rolls Royce cars in the world after London, Beverly Hills and Tokyo, while Al Habtoor Motors sold 160 Bentley cars in the country in 2006. In 2007 the number of Bentleys to be sold in the UAE will drop 15 per cent over the previous year, not because demand is falling, but because the manufacturer is unable to keep its pace with the demand across the world.
So, Akram continues, in a market where luxury cars are in abundance, the owner of a Porsche 911 is ready to pay a good packet for that number. The same is true for owners of a particular series of BMW cars or Mercedes Benz.
"I have had government officials holding important positions and wealthy people from the UAE and the GCC apart from Russia, India, Pakistan and Iran on the lookout for their coveted licence plate numbers. The prices vary in their range depending on the series and numbers. But to give you an indication of the demand, I feel a code A single digit number in the Dubai market has the potential of fetching up to AED35 million," he says.
In fact, Akram discloses that he has already seen a secondary market deal recently of AED28 million for a single digit plate in the Dubai market, although he refuses to divulge the number or any other detail of that transaction; this is also an indication that a majority of these transactions remain under wraps and only in the knowledge of a small community of traders and dealers.
As this story goes into print Dubai's RTA is all set to conduct its ninth auction of plate numbers on September 1. Under the hammer will be numbers offered at par priced in a range between AED10,000 and AED120,000. The RTA auctions in the past have been extremely successful. In fact the last one, in March 2007, collected a total of AED30 million. But then, as Akram says, once these numbers enter the secondary market their potential in terms of what price they could attract is limitless. In other words, these numbers are priceless to the collectors. So, it may not be a bad idea to visit the RTA at the next auction, especially at a time when there is so much volatility in the global equity markets and dampness in the local stock market.
Numbers that are off limits
According to traders in licence plate traders, most numbers can be bought and sold legally in the country. Some exceptions, however, include all code A or code B four digit numbers beginning with the number 8 in Dubai. These numbers belong to either the royalty or high officials. All code A five digit numbers that start with number 5 are also not tradable as these numbers belong to the police department. In Fujairah all code A numbers are not tradable as these belong to royalty.
This article appears in the September 2007 issue of MONEYworks magazine.
© UAE MONEYworks 2007
