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Tesla’s coveted Model S was the bestselling sedan in Hong Kong in 2015. Photo: Dickson Lee

Exclusive | Tesla to reduce Hong Kong operations if city refuses to promote electric cars

Source says Elon Musk-led firm asked Carrie Lam to rethink last year’s decision to slash tax break for electric car buyers, which stalled Tesla sales and caused overall demand for battery-powered cars to crash


US electric car maker Tesla is ­prepared to reduce its Hong Kong operations if the government fails to give residents incentives to buy battery-powered cars in its ­upcoming budget, a source close to the company told the Post.

The source said Tesla, led by billionaire entrepreneur Elon Musk, had written to Chief Executive Carrie Lam Cheng Yuet-ngor asking her to rethink last year’s ­ removal of a full registration tax waiver on electric cars for private use. The move resulted in buyers paying as much as 80 per cent more for high-end models.

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With the tax waiver capped at HK$97,500 from April 1 last year, sales of electric cars nosedived. Only 99 new cars were registered from April to December last year, compared with 2,078 in the same period the year before.

Sales at Tesla, which employs 200 people in the city, were hit hardest. It sold 32 cars from April to December, although 2,939 cars were snapped up in March, as buyers rushed to its showrooms after Financial Secretary Paul Chan Mo-po’s announcement that the waiver was ending in last year’s budget.

An average of 230 Teslas were sold each month from April 2016 to February 2017, mostly of the Model S, the top-selling sedan in the city in 2015. To the excitement of consumers, the car also featured on ride-sharing app Uber.

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“Scaling down Tesla’s operation in Hong Kong is a natural and logical consequence if the number of customers has dwindled prompted by a reduction of government incentives,” the source said. “Without government support, who is ­willing to invest in green technology?”

Asked for its comments, Tesla told the Post on Sunday: “Our launch in Hong Kong in 2010 was one of Tesla’s earliest, and we remain committed to our customers here, affirming that commitment with the opening of our second Service Centre last year.

“We remain hopeful that the government will continue to encourage more electric vehicles on the road and preserve Hong Kong’s lead in clean, sustainable living.”

Separately, a source in the car industry said big manufacturers had urged Chan to remove the full tax waiver for electric cars because they were threatened by their rapid growth in the city, especially of Tesla, which dominated about 90 per cent of the market. BMW, Nissan, Volkswagen and Renault also sell electric cars in the city.

“The sale of Tesla cars in one month was equal to the annual sales figure of some petrol car brands,” the source said. “They all complained that the rapid growth of Tesla these few years had made their lives really difficult.”

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It is understood that Chan, who chairs a steering committee on the promotion of electric ­vehicles (EVs), did not consult EV makers before his budget announcement, in which he also said the full registration tax waiver for other kinds of EVs – such as goods vehicles, buses and motorcycles – would remain.

A government spokesman said that in deciding on tax ­concessions for EVs last year, the government had considered the narrowing price difference ­between electric cars and fuel engine models, and “its public transport-oriented policy”.

Electric car owners, as well as getting a tax break, “also enjoy lower annual car licence fees and fuel costs”, the spokesman said.

Electric cars cost between HK$270,000 and HK$1.1 million before tax. A progressive tax is ­applied on motor vehicle registration, starting at 40 per cent of the first HK$150,000 of the vehicle’s taxable value.

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The spokesman added that the government was reviewing the tax concessions for EVs ahead of the budget statement, which is expected to come at the end of the month. It would factor in technological developments, the state of the market and other feedback.

Tara Joseph, president of the American Chamber of Commerce in Hong Kong, said the chamber was “puzzled” by the policy change.

“Chief Executive Carrie Lam has said she wants to attract leading global tech firms to Hong Kong, but green technology companies, like all companies, require policy transparency and assurance,” she said.

Hong Kong should be encouraging electric vehicle use, not curbing it

Wesley Wan Wai-hei, an EV committee member, said Chan was told that his tax initiative had contradicted efforts to promote the use of EVs, which were less polluting, and that he needed to rectify the situation.

“The steering committee advised him to offer a 50 per cent tax discount to those who want to buy electric cars to replace their fuel cars if they prove they have ­deregistered their old cars,” he said. “Of course, it’s up to Paul Chan to decide whether to take the committee’s advice.”

This article appeared in the South China Morning Post print edition as: Tesla ‘readyto put the brakes on hk venture’