To combat the worsening traffic congestion and urban air pollution, more and more major cities in China are adopting automobile license quota systems to curb the growth of automobile ownerships. Market-based mechanisms (e.g., auction), non-market based mechanisms (e.g., lottery) and hybrids of the two are being used to distribute limited automobile licenses. This study empirically quantifies the social welfare and revenue consequences of the different automobile license quota systems by estimating external costs from automobile usage and consumers’ willingness-to-pay for an automobile license in Beijing, Shanghai, Tianjin and Nanjing. Our analysis finds that the lottery system exhibits the largest welfare loss while the auction system the smallest. There is significant heterogeneity in both external costs in automobile usage and consumers’ willingness-to-pay for an automobile license across these cities. Beijing’s lottery system forewent 13. 8 billion RMB in consumer surplus, and Shanghai’s auction system forewent 2. 86 billion RMB, relative to the optimal quota in 2012. A uniform price auction system would have generated (1- 20) billion RMB to each city, which can be used to finance local public transit system.