Formula E

As Formula E races through Hong Kong, a tax tweak has hit electric car sales hard

The race cars are back in town, but motorists’ zeal for greener cars appears to have been drained by a massive duty increase

PUBLISHED : Saturday, 02 December, 2017, 4:02pm
UPDATED : Saturday, 02 December, 2017, 10:57pm

The Hong Kong government’s decision to slash a tax break on electric cars coincided with a precipitous decline in sales of the greener vehicles, government data has revealed.

On the weekend that the city hosts motor sport’s premier electric car event, the buzz appears not to have captured the imagination of consumers; sales of battery-run cars have dropped by 97.1 per cent since the Formula E cars rolled into town a year ago.

Since 1994, the government had waived the registration tax on electric cars. But in the February budget it drastically reduced that to a subsidy capped at HK$97,500. That caused prices of cars such as Teslas to jump by up to 80 per cent.

Since Hong Kong sidelined electric cars, other governments have moved in the opposite direction to embrace the vehicles, and phase out sales of petrol and diesel cars. Britain and France set a deadline of 2040 for an end to sales of cars run on fossil fuels. China announced a similar intention without setting a deadline.

Tesla models accounted for 96 per cent of the 5,741 electric cars sold in Hong Kong from May 2016, when the government started disclosing the figures in detail, to October this year.

In three of the seven months since the tax break was pulled, no one registered a new Tesla with the government. Overall, only 49 electric private cars were sold between April and October, a 97.1 per cent fall from 1,706 in the same period last year.

The government said at the time the tax breaks were adjusted to curb the overall growth of private cars. But numbers suggest the government has instead just spurred the sale of petrol and diesel cars, sales of which have hit record levels in recent months.

After Chief Executive Carrie Lam Cheng Yuet-ngor’s policy address in October, she acknowledged the complaints at the tax break’s dilution, and the efforts of governments around the world to curb the use of petrol and diesel cars.

The Environment Bureau, which oversees the electric vehicle tax concessions, reiterated on Friday that the current subsidy would be reviewed before it expires in March 2018.

“The government has been committed to promoting the use of electric vehicles (EVs), which have no tailpipe emissions, as replacements for conventional vehicles. Wider use of EVs could help improve roadside air quality,” a bureau spokeswoman said.

But Locky Law, a Tesla owner and representative for Charged Hong Kong, a group that champions electric vehicles, said the government’s words did not match its actions.

“I am just as confused as any other user or prospective and potential buyer of electric vehicles. What is the message that the government is trying to send out?” he said.

“What the policy has done was support petrol carmakers; has made Hong Kong more polluted; and not curbed [private vehicle] growth at the same time. That’s just bizarre.”

Want a free Tesla? Yours if you are willing to spend up to US$5 million on a Hong Kong flat

The change also sparked a heated debate in the Legislative Council last month during a motion to vet the annual policy address. In a rare show of bipartisanship, eight lawmakers across the political spectrum were united in calling for a review of the tax waiver, objecting to the cut.

Winnie Tse Wing-lam from anti-pollution group the Clean Air Network (CAN) said while electric vehicles boast zero emissions, private cars were responsible for worsening traffic.

Instead of reinstating the full tax waiver for electric private cars, the CAN proposed an alternative. “Even if we were to offer a tax break to encourage the use of electric cars, the subsidy should only be given to car owners who turn in their petrol vehicle. A one-for-one swap would not lead to car growth,” Tse said.

The news of the sales collapse for electric cars came during the weekend that the Formula E races took place in the city. Speaking at a race team event, Gavin Edwards, conservation director at WWF Hong Kong, said Formula E was key to the success of electric cars.

Watch: China’s path to electric car supremacy

“The quicker we can get more efficient battery technologies, more efficient engines at the high end as we see with the racing cars, the more that can be commercialised down to the consumer end, the cheaper an electrical vehicle will be,” he said.