Bidders must be Shanghai residents, or have at least three years of uninterrupted payments of social security or income tax.
In addition, the bidder must not have a road traffic offence in the year before bidding.
Plate auctions will be suspended as of Sunday.
The new standards will take effect from July 19, state-run Xinhua news agency reported.
According to a report by the Shanghai Urban-Rural Construction and Transportation Development Research Institute, the city has almost 2.5 million cars on its streets.
Instead prospective buyers have to obtain a number plate.
Some cities including Beijing use a lottery system.
Shanghai uses an auction system to sell a limited number of license plates to fossil-fuel car buyers every month.
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