When I accidentally encounter this question about Shanghai, I immediately think this is an interesting question. Less knowing about Shanghai or Shanghai mystery to people who never have a chance to visit?
And I would elaborate by my own observation.
Generally speaking, it is legal to own a red color car in Shanghai. Red cars are not many though, but you still could see red car driving on the street occasionally.
Why so less red color car on the Shanghai street? I guess:
1. Chinese may think red color has something linked to blood. This is not a good sign while driving a car.
2. Red car is too obvious on the street, and drivers may not want to catch more attention from police unless you are sporty.
3. If drivers really like red color car, vendors do have several varities of mixed design in red.
What else reasons? Do you know? I think the major one is No. 1.
By the way, do you think this is a red color car?

A red color taxi in Shanghai
How about this one?

Red color car parking in Shanghai street
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Hi, where is the red light district in Shanghai?