Does Hong Kong want to be a clean, green city? Cutting the electric vehicle tax waiver is not a smart move

Transforming Hong Kong into an environmentally friendly city with blue skies and clean streets is a vision everyone can share. We already have one of the most beautiful harbours in the world, crowned by undulating hills that rise above a dynamic and connected urban space.

Yet Hong Kong continues to tolerate streets and air choked by pollution, even though we have the knowledge and means to establish ourselves as an innovation hub, incorporating energy efficiency with cutting edge forms of recycling, transport and digital technology. This city’s advanced economy boasts a cash surplus and a globally aware, well-educated population. It has the bonus of being small, so getting from point to point is relatively easy.

Hong Kong also now has its champion for smart city development. Chief Executive Carrie Lam Cheng Yuet-ngor has demanded a shift in officials’ mindsets and made a strong push towards smart city initiatives.

Put electric vehicle goal back on track

But much remains to be done if Hong Kong is to take its rightful spot as an advanced, smart economy, including untangling major inconsistencies in recent policy and actions stymying progress and leaving the city trailing other urban centres. Hong Kong failed to make the list, published by the International Council on Clean Transportation this month, of 20 cities leading the transition to electric vehicles.

After almost two decades promoting EVs, the government in April abruptly changed tack, drastically reducing the first registration tax waiver on private EVs just as sales appeared to be gaining momentum. In September, just 13 EVs were registered as private cars, compared with 528 a year earlier, according to the latest figures from the Transport Department.

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Such policy changes don’t just have a dampening effect on consumer behaviour. The ramifications spread to the investment decisions of big corporations too. The rising trend in sales gave companies the confidence to make long-term financial commitments to support development and deployment of cleaner technology vehicles with battery, service and charging technologies.

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Market leader Tesla, for example, opened three showrooms and two service centres in the city – including its largest in Asia. The company also invested in more than 400 super and medium chargers in public locations across Hong Kong, as well as providing a charger to each owner to use at home.

In the six months before the tax waiver change was announced, 1,391 new Tesla cars were registered in Hong Kong. But in the two months following its scrapping, not a single one was sold in the city.

The government has said that the tax waiver was capped to reduce traffic congestion after a significant increase in the size of the private car fleet in recent years.

The government seems to have assumed that many EVs being purchased in Hong Kong were discretionary “second cars” that would not be replaced with cheaper conventional vehicles if the tax waiver were reduced. Statistics show, though, that this isn’t the case. Private car registrations are on track to increase this year by a higher percentage than in 2016 – even factoring out a big spike in EV registrations in March, just before the tax waiver cap took effect. It’s just that a much higher percentage of the new cars hitting the road this year are fossil-fuel burners, rather than electric vehicles.

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The government’s action goes against its stated vision to build a better, cleaner and healthier environment. Instead, the effort to introduce EVs was halted just as Hong Kong announced its commitment to green transport and innovative technologies under the banner of creating a smart city.

The policy reversal also has ramifications that go beyond blurring Hong Kong’s commitment to a cleaner future. It also mars Hong Kong’s long-standing reputation as a leading economy based on principles of transparency and openness.

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Lam has spoken about the need to enable the government to become a facilitator and market creator, rather than a regulator. The sudden about-turn on tax incentives for EVs was a move in the opposite direction. The decision was made behind closed doors and without addressing consumers or companies who invested a great deal to bring Hong Kong up the value chain.

Furthermore, the move undermines the government’s drive to nurture an innovative spirit that will drive Hong Kong’s future success. After all, the benefits of having world-leading tech companies in Hong Kong is not just about selling cars. It is more about the transfer of technological know-how and the creation of an entrepreneurial spirit, and an ecosystem favourable to tech and innovation.

We believe that the new administration can find balanced solutions that reduce congestion without sacrificing Hong Kong’s adoption of green technology and promotion of sustainable living. In order to remain competitive and secure a bright future, Hong Kong must adopt a fresh approach to green initiatives and new technologies.

Beyond that, we hope that the city continues to promote free market principles within the framework of a strong legal system and robust consumer market. This is, after all, Hong Kong’s greatest strength.

Tara Joseph is president of the American Chamber of Commerce in Hong Kong