Tesla is under scrutiny in Hong Kong for possibly taking advantage of tax exemption on ~500 cars ahead of phaseout

As we reported earlier this month, Tesla saw important increases in deliveries in the Chinese and Hong Kong markets, which seem to have made the difference for Tesla during the quarter – its biggest ever for deliveries.

In Hong Kong, it was partly because buyers rushed to buy EVs before the aggressive phaseout of its tax exemption for electric vehicles starting in April.

A new report now suggests that buyers were not the only people registering Tesla vehicles before the end of the tax exemption, which can almost double the price of a Model S or Model X, but that Tesla could also have registered hundreds of vehicles.

Sing Tao Daily published the report (Chinese) based on information leaked from the HKAA, Hong Kong Automobile Association, an organization not exactly known to be pro-electric vehicles.

They say that 510 Tesla vehicles were registered by a “non-personal owner”, which they are suggesting is Tesla Hong Kong. They estimate that registering those unsold cars before April 1st led to 500 million yuan (~$72 million USD) in tax exemption.

When the phaseout was confirmed in February, there were over 7,000 electric vehicles in Hong Kong with Tesla still maintaining over 80% market share. In March alone, 2,964 electric vehicles were registered in the city just before the start of the change in incentives in April – or about 3,908 during the first quarter.

That’s more EVs added in Hong Kong in the first 3 months of 2017 than during the entire year in 2016. Therefore, the majority of the increase is definitely attributable to private buyers taking advantage of the tax exemption before the phaseout.

Tesla HK didn’t confirm that they were behind the vehicle 510 vehicles registered by a “non-personal owner” and said that they only had a “small number” of inventory vehicles currently for sale.

We found that they are currently only listing 28 new inventory vehicles on their website in Hong Kong and they don’t have any certified pre-own vehicles in the area.

After we published our report on Hong Kong’s tax exemption helping sales in the first quarter, David Tamberrino, Goldman Sachs auto analyst, asked Tesla CEO Elon Musk if he thinks it inflated demand and that it will have an impact in the second quarter. Musk answered:

“Yes. There was some pull forward demand in Hong Kong, but that’s one city on earth. So there’s no impact on our ability to achieve our delivery target for Q2.”

An increase in Tesla’s vehicles in Hong Kong could also be explained by Tesla’s overall inventory increase to support its fleet of loaner vehicles.

Earlier this month, Tesla President of Global Sales and Service Jon McNeil announced that Tesla would be increasing the fleet of loaner vehicles so that Tesla owners would always have access to Tesla’s latest top-of-line vehicle when their car is in service.

Considering Hong Kong has one of the highest concentration of Tesla vehicles (likely approaching 10,000 owners), it’s normal that they would need a large fleet of loaners and that they would aim to deliver and register them before the end of the tax exemption.