As we previously reported, Tesla once dominated to booming electric vehicle market in Hong Kong with over 80% market share and thousands of vehicles delivered. That stopped last year after the government phased out the EV incentives and almost killed the market by doing so.
After almost a year of virtually no EV sales, Hong Kong is now bringing back some incentives in order to try to revive its EV market.
The previous phase-out of the incentives still maintained a waiver of up to HK$97,500 (~$12,000 USD) on the city’s expensive first registration tax (FRT), but it still almost doubled the price of some EVs.
As part of its new budget unveiled today, the government has now announced that it is maintaining this measure, but it is also adding a more significant new FRT waiver of up to HK$250,000 (~$32,000 USD).
But drivers are only eligible if they “arrange to scrap and de-register their own eligible old private car (private car with an internal combustion engine or electric private car) and then first register a new electric private car.”
At this point, it’s really unclear if it will be enough to breathe some life into the local EV market.
As previously discussed, Tesla’s Model S and Model X were the most popular EVs in Hong Kong before the phase-out of the incentives. The base version of the Model S used to cost HK$620,000 (~$79,000 USD) after all the exemptions.
After the phase-out of the incentives, the price skyrocketed to HK$1,035,000 (~$132,000 USD).
Now after the new program, the vehicle could cost about HK$882,000 (~$113,000 USD), according to a local Tesla owner.
Again, the impact of the updated incentive is unclear at this point, but it’s not expected to bring the market back to anywhere near what it was in 2016.
In September 2016, we reported on German automakers complaining about Tesla’s owning the EV market in Hong Kong, which they claim was because the EV incentive didn’t apply to plug-in hybrids (Tesla only makes all-electric vehicles while German automakers offer more plug-in hybrids).
At the time, their lobbying effort was focused on including plug-in hybrids, but they also said that the current implementation of the incentive was “unfair”.
The local government instead decided to give up on the incentive altogether.
While it was clear that a drop in demand would follow the change, the complete halt of sales is an even bigger impact than anticipated.
Of course, the anticipated phase out created an artificially high demand for EVs and resulted in almost 3,000 EV registration in March or an increase by about 30% of the city’s entire EV fleet.
Tesla benefited from that rush from buyers to take advantage of the tax exemption before it started phasing out. All but 20 of the 2,964 cars registered in March were Tesla’s vehicles – though Tesla is also believed to have registered some of those themselves.
8 months after the rush, Tesla sold only 32 more cars in Hong Kong, according to registration data.
Earlier this month, the automaker warned that it has plans to downsize in the country after the tax hike on EVs.
Here are all the details of the government’s new tax waiver plan for EVs: