Tesla hopes to emulate its Hong Kong success in other Asian markets

Tax waivers and government support helped Tesla in the Hong Kong market, but these factors are currently lacking on the mainland and in Singapore

PUBLISHED : Monday, 20 June, 2016, 2:52pm
UPDATED : Tuesday, 21 June, 2016, 2:24pm

Much of Tesla’s success in Hong Kong is due to tax waivers and government support, and the same is needed in other Asian markets before Tesla can become more mainstream, according to industry experts.

In 2015, the Tesla Model S was the best-selling sedan in Hong Kong with sales of over 2,000 units. The success in the city prompted Tesla chief executive office Elon Musk to call Hong Kong a “beacon city” for electric vehicles, before saying that he hoped the rest of the world will follow Hong Kong’s lead.

“Hong Kong has one of the most technology savvy and forward-thinking populations,” said Robin Ren, vice president for Tesla in Asia-Pacific. “So naturally when a new product category such as electric vehicles comes into the market, they are the first ones to pick it up.”

Ren also said that the Hong Kong government played an “important role” in educating the public in early adoption, by implementing tax waivers as well as setting up the required battery charging infrastructure in the city.

The biggest contributor to Tesla’s success in Hong Kong is likely the government’s waiver of first registration tax on eligible electric vehicles. Under the scheme, which is currently valid until March 2017, drivers who purchase a Tesla Model S in Hong Kong are able to save upwards of HK$480,000 in taxes, making the vehicle more affordable.

Locky Law, a Tesla owner and representative for Charged.HK, said that the tax waiver played a big part in helping him afford a Tesla Model S.

“Without the waiver, there won’t be as many Tesla owners in Hong Kong,” said Law. “There would still be some super rich people who can buy it, but going green shouldn’t be a privilege for the rich.”

A market with similar characteristics to Hong Kong is Singapore – a market that Tesla has yet to crack. It pulled out of Singapore in 2011 when the company failed to qualify for a tax break that would have made its cars more affordable in the city.

However, Tesla said it had accepted some order reservations for the Model 3 from Singapore customers, although there is not yet a specific timeline to enter Singapore as a market.

Despite the company’s achievements in Hong Kong, the more important market for Tesla is China – the world’s largest automobile market. Although Tesla faced an uphill struggle when it first entered the mainland amid lower-than-expected demand and a lack of extensive, compatible charging infrastructure, Ren is confident that Tesla can build on its base in China.

“We’re doing very well in China, we’re growing very fast and putting huge amounts of investment in growing our presence this year,” said Ren.

However, analysts are doubtful that Tesla can become as accomplished in the mainland Chinese market as it has in Hong Kong.

“There are no subsidies for electric car buyers in China,” said Zhang Yu, an analyst at Shanghai-based Automobile Foresight. “Purchasing a Tesla is much more expensive on the mainland than in Hong Kong because of Chinese import duties since Tesla cars are not domestically manufactured.”

China imposes a 25 per cent import duty on foreign vehicles, and Musk suggested in a tweet last October that a Chinese Tesla factory could become a reality around 2019 to improve “in-market affordability”.

Zhang said that Tesla is currently more popular in cities such as Beijing, where electric car buyers have an easier time obtaining a license plate in a separate license plate lottery for new energy vehicles.

“For the wealthy in Beijing, they may want to purchase their second or third car but find it difficult to win a license plate for a petrol-powered car,” said Zhang. “So, they may turn to electric vehicles since it’s not as difficult to get a license plate.”

He said that while Tesla often positions itself as a luxury brand, the quality and trimmings of the company’s cars are still not comparable to more luxurious brands such as BMW, which are status symbols for the rich in China.

Neil Wang, managing director for Frost & Sullivan China, said that more government support is required in China before electric vehicles can become more widely accepted.

“Incentives for electric vehicle buyers, such as tax incentives and more development of charging facilities, are still needed to stimulate the development of electric vehicles in China,” Wang said.

In the last paragraph, Neil Wang’s company affiliation was changed to Frost & Sullivan China