Tesla CEO Elon Musk has described Hong Kong as a “beacon city for electric vehicles” due to its fast growth in EV adoption, which Tesla is a big part of since the company had an impressive 80% market share of Hong Kong’s 5,800 EVs as of this July.

Locky Law from EV advocacy group Charged Hong Kong estimates that the number is now over 7,000 with Tesla still maintaining over 80% market share. It makes Hong Kong a very important market for the company, but that’s about to change.

The local government imposes a massive first registration tax in order to control new vehicle deployment, which so far had been waived for electric vehicles.

On the least expensive version of the Tesla Model S, the tax adds up to $435,000 HKD (~$56,000 USD), which almost doubles the price of the vehicle.

Today, the government announced that as part of the new budget, it is modifying the program and instead of a complete waiver of the ~$56,000 USD tax, it will be waived up to up to $97,500 HKD (~$12,500 USD).

A spokesperson for the Environment Bureau (ENB) said:

“The Financial Secretary has announced in the Budget Speech today that, in consideration of the overall growth of the private car fleet in recent years and the increasing acceptance of electric private cars by drivers, from April 1, 2017 to March 31, 2018, first registration tax of electric commercial vehicles, electric motor cycles and electric motor tricycles will continue to be fully waived. However, the waiving of first registration tax for electric private cars will be capped at $97,500.”

Of course, it affects all electric vehicles, but since Tesla is dominating the market, it is the company most affected.

In the best case, it increases the price of the Model S by over $300,000 HKD ($40,000 USD) and in the worst case (for top-of-the-line Model S/X), it increases the price by over $1 million HKD ($150,000 USD).

They made the announcement today and imposed the limit date to order on the same day, which is taking a lot of people by surprise.

Tesla was somewhat anticipating it. They made a marketing push in Hong Kong ahead of the potential end of EV incentives at the end of last year in order to accumulate orders. The vehicles will need to be delivered by the end of the quarter in order to get the full tax waiver.

Tesla President Jon McNeill even traveled to Hong Kong to lead talks with the local government in order to extend the tax break, but apparently, it didn’t work.

He feared that it would create a situation similar to Denmark when it announced the phasing out of its tax break for electric vehicles by the end of 2015, which caused Tesla’s sales to surge to an all-time high in the country, but they have been virtually non-existent since then.

Locky Law, Tesla Owners Representative for the EV advocacy group Charged Hong Kong, expects that it is exactly what will happen. The incentive helped bridge the gap until less expensive electric vehicles hit the market, but it looks like it was removed too early since those vehicles are not expected to reach Hong Kong for at least another year. There’s always the potential of the decision being reversed in the upcoming election, but it is the law for now.

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