Cars and tax breaks: Hong Kong’s luxury economy
If you’re living in somewhere in the US or UK, or pretty much anywhere in the Western World, a Tesla is right up there when it comes to expensive cars. It’s the latest technology and to own one is a sign of prestige as much as showing you’re conscious of your environmental footprint.
But in Hong Kong’s luxury market where there’s money to be spent, a Tesla used to be cheap. With 0% tax it was much more affordable than, say, a Mercedes C-class. In 2017 this tax break was capped, but with the budget announcements on February 2018 there’s once again some relief for purchasers of new electric cars.
Welcome to one of the juggling acts of politics and finance in Hong Kong.
Perhaps Tesla’s threats to abandon shipping into HK had something to do with the new budget announcements. And maybe Mercedes-Benz had something to do with capped electric car tax in 2017.
Cars are an issue in Hong Kong. As the small island grew richer, people began to spend their money on these kinds of luxury goods. Congestion and pollution became big issues fast, and while hefty road and car registration taxes were introduced it didn’t stop people buying cars.Which was great for luxury car manufacturers. The roads were flooded with gas-hungry vehicles like Mercedes.
This was particularly bad for the environment, and in 2009 a government objective was set to increase the use of electric cars. The tax waiver got electric car numbers from just 69 in 2011 to 10,588 by April in 2017 – which was great for car manufacturers like Tesla, who hold about 90% of the electric car market.
When that tax break was capped last year electric car growth slowed and suddenly the roads started to fill with Mercedes vehicles once again. This, understandably, “demoralised” Tesla who planned to reduce operations in HK if the government didn’t push electric cars once more. So now if you trade in a car that’s at least 6 years old, which you’ve owned for at least 3 consecutive years, you could get a first registration tax break of HK$250,000 on a new electric vehicle.
In the next couple of years the numbers of Mercedes will drop on the road for a second time to be replaced, once again, by Teslas.
It’s true, there are just two years left for the government to deliver on its 2009 promises about electric car usage and they’re not positioned well. Petrol and diesel cars have risen from 40,0000 to 60,0000 and only about 2% of cars on the road are electric, so there is a need to encourage more people to go electric.
But if you’re motivated by environmental goals, why drop the tax breaks in the first place?
Source of image: flickr