Electric car buyers get new HK$250,000 tax break but will it boost Hong Kong’s flailing market? 

Buyers can enjoy the break on a new purchase if they trade-in a car that is at least six years old in a move the government hopes will increase zero-emission vehicles on the city’s roadways

PUBLISHED : Wednesday, 28 February, 2018, 3:14pm
UPDATED : Wednesday, 28 February, 2018, 11:30pm

Electric car buyers in Hong Kong who wish to enjoy a tax break of up to HK$250,000 must first scrap a car in a one-for-one replacement scheme announced by Financial Secretary Paul Chan Mo-po on Wednesday.

However, a HK$97,500 (US$12,500) cap on the current tax break for electric vehicles (EVs) would stand, after its implementation last year all but stifled the electric car market in Hong Kong.

A government source admitted it was hard to predict whether the measure, which takes effect immediately, would boost flagging sales of zero-emission vehicles.

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To enjoy the higher tax break, private buyers must first scrap another car in a one-for-one swap, intended to maintain the number of cars on the road.

The car to be scrapped must be at least six years old, while the applicant must have owned the vehicle for three consecutive years or more.

The stringent rules are believed to curb opportunistic buyers who snap up cheap vehicles for disposal and enjoy the tax break.

The HK$250,000 tax break would cover the first registration tax of private cars valued at HK$377,500 or less. A source from the government indicated four out of six carmakers sells EVs in that price range.

“The government feels that the purchase of high-end models should be not subsidised by taxpayers’ money, especially when more mass market EVs have become available on the market over the past years,” the source explained.

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EV buyers who did not wish to take part in the scheme would still have to pay all taxes exceeding HK$97,500.

The government source emphasised the measure had properly addressed the views of different stakeholders, saying the policy to promote green energy – in the form of a EV subsidy – must not encourage the ownership of additional vehicles and worsen traffic congestion.

Hong Kong has been one of the fastest adopters of electric vehicles in the world – the fleet grew from just 69 in April 2011 to 10,588 in April last year, largely due to a complete waiver on the first registration tax.

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But the full waiver was capped at HK$97,500 in April 2017. Only 99 battery-powered private cars were sold in the following nine months, compared with 2,078 in the same period the year before.

Deemed as a luxury item in a densely populated city, the government imposes a hefty premium on the purchase of private cars, with a progressive tax rate of up to 115 per cent of the car’s value.

Eddie Chu Hoi-dick, an opposition lawmaker, opposed the scheme, raising concerns that people may find loopholes and purchase old cars just for the sake of the allowances. He said green transport should always be promoted through public transport.

Pro-establishment lawmaker Chan Hak-kan said the first registration tax concessions for private electric vehicles was “conservative”, adding that not all people have a car they can trade in. The tax concessions capped at HK$250,000 might also not give enough incentive for citizens to purchase a new electric private car, he said.

Tesla, the leading e-car maker in the city with about 90 per cent of the market share, declined to comment. 

Additional reporting by Sum Lok-kei and Kimmy Chung