A ban on temporary out-of-city license plates on cars operating within Shanghai's Outer Ring Road could put drivers who do not have permanent plates off the road, according to auto industry insiders.

When the ban took effect on Sunday, hundreds of people lined up at the two spots where bidding documents for permanent license plates could be purchased. The documents include a unique identification number that the bidder then uses in an online process to seek a permanent license. Local media called the scene "unprecedented".

In recent years, out-of-city temporary plates have been used by many car owners in lieu of hard-to-get Shanghai plates. Some drivers have even resorted to permanent plates from other provinces.

The city issues only about 8,000 permanent license plates each month.

Many car owners turned to the out-of-city plates after failing to secure a permanent Shanghai plate from the city's bidding system. It's a way to stay on the road. The other option - driving an unlicensed vehicle - is less palatable.

"Each private car can only apply for a Shanghai temporary license plate three times, with each valid for 30 days," said Shang Zhenhao, a 29-year-old Shanghai resident. "After using up the three opportunities but still not winning a license plate in the auction, I had to buy an out-of-town counterpart. If I didn't do that, I couldn't drive the car."

Under the new rule, which bans temporary plates from outside the city, people can only hope to win the auction - a long shot, since only about 3.8 percent of bidders succeed, according to city authorities.

Typically, in the past, a car buyer paid a broker around 300 yuan ($46.40) to purchase a temporary license plate. But high market demand has inflated the price to 1,000 yuan, according to Ji Wenjun, a sales manager at a car dealership.

Shanghai launched its monthly auction in 2000, and the price surged. The online process calculates what most people say they are willing to pay for a license, and that becomes the benchmark. The average transaction cost 58,625 yuan in March 2012 - a record high at the time. It skyrocketed to a staggering 85,000 yuan in recent months.

Wang Wenchao, a sales manager at another dealership, said: "It won't be surprising this month that both the number of people participating in the auction and the base bid will break records."

Following Sunday's ban on out-of-city temporary licenses, many people have said they would continue to seek a Shanghai plate rather than turn to a permanent one from another province.

Meanwhile, some leave their car parked or drive it without legal license plates.

Shanghai police said that on Sunday alone, 193 improperly licensed vehicles were found driving within the city's Outer Ring Road as of 4 pm.