Hong Kong Budget 2017-2018

Decision to cut Hong Kong’s electric vehicle tax waiver is ‘backwards’ and sends wrong message, critics say

From April 1, a Tesla Model S will set buyers back about HK$1.5 million, up from HK$800,000

PUBLISHED : Saturday, 25 February, 2017, 4:20pm
UPDATED : Monday, 27 February, 2017, 3:37pm

The government has been ­accused of targeting electric vehicles and setting Hong Kong back as an environmentally conscious and high tech city, following the ­removal of a tax break this week.

Earlier this week, Financial Secretary Paul Chan Mo-po announced that the full waiver of First Registration Tax for e-cars – a measure that has been in place for more than 20 years – would end on March 31, with the tax discount to be capped at HK$97,500. The move was aimed at curbing car growth and improving traffic.

But Dr Jeffrey Hung, head of research, development and strategy at Friends of the Earth (HK), questioned the logic of the policy change.

“Why target electric cars? There are many ways to reduce traffic congestion,” he said. “They could improve public transportation, set up low-emission zones, increase licence fees or electronic road pricing. Before there was an incentive for electric cars, but now there is a disincentive.”

From April 1, a Tesla Model S, which costs HK$800,000 under the current full tax waiver, will now set buyers back about HK$1.5 million. A BMW i3, currently HK$430,000, will cost HK$635,000.

Tesla said the government’s decision “threatens to move Hong Kong backwards”.

“The tax decision sends a wrong message about environmental protection,” Thomas Kan-ming, an executive committee member of the Electric Vehicle Club Hong Kong, said.

“Electric cars make up 1.2 per cent of the total number of cars. Slowing their growth will have little effect on traffic, but it sends the wrong message about moving towards a green city,” Kan said.

With the new price, I will consider European brands like BMW, Mercedes-Benz or Audi, because they offer other things that electric cars don’t
Ms Lau

“This is an abrupt change of policy that does not make sense,” lawmaker Charles Mok said.

“Not long ago, the government was using Hong Kong’s growing fleet of electric cars to showcase how we are an environmentally conscious and a high tech city. But now, it is targeting electric cars to reduce traffic. How about Hong Kong’s air pollution problem?”

Thomas Kwan, chairman of e-car owners’ group Electrify Hong Kong, said: “A much better alternative to curb growth is to increase first registration tax of fossil fuel vehicles by using a progressive rate based on their emission level and waive the tax for car owners who switch from fossil fuel vehicles or an old e-car to a new one.”

A spokesman for the Environmental Bureau said the government was committed to “prom­oting electric vehicles as replace­ments of conventional vehicles”.

Dr Hung Wing-tat, a fellow of the HK Chartered Institute of ­Logistics and Transportation however, backed the tax waiver reduction, saying consumers were not just buying electric cars as replacements, but were also ­attracted to the new technology.

In the past three years, the number of electric cars went from 314 to 6,694. The government said it had paid HK$4.4 billion in e-car tax subsidies over the past 23 years.

“If the price of electric cars ­almost doubles, then I will have many other choices,” Ms Lau, who visited the Tesla showroom on Thursday, said. “With the new price, I will consider European brands like BMW, Mercedes-Benz or Audi, because they offer other things that electric cars don’t, such as design and luxury.”

Rene Koneberg, managing director of Audi Hong Kong, ­welcomed the change, saying it was a “good move”, noting that the tax subsidy cap was similar to some European markets.

In Denmark, the government’s decision to phase out a 100 per cent tax waiver on e-cars in 2015 saw sales down almost 80 per cent year-on-year in the first six months of last year. The tax is gradually raised from zero to 180 per cent of the sale price between 2016 and 2020.

Another source from a European carmaker told the Postthat the tax changes would “level the playing field”, and that the Hong Kong market had long been “biased” ­towards electric cars.

“The electric vehicle market is more than Tesla, there are other European and Japanese models in the low to mid-price range. If they are not fully tax free, and become more expensive, then consumers have a reason to look at alternatives,” the source said.