Environment & Health Hong Kong Travel & Transport

Buyer’s tax for private electric cars will return due to overall increase in car ownership, says finance chief

Financial Secretary Paul Chan Mo-po has said that the reintroduction of first registration tax for private electric cars was because of a large increase in overall vehicle ownership over the past few years. However, electric private cars only make up a small portion of the city’s private car fleet.

The first registration tax was previously waived to promote a wider use of electric vehicles to replace diesel and petrol vehicles. The measure was designed to improve roadside air quality.

It was announced in the annual budget that the waiver arrangement, which will expire on March 31, will be revised and that the tax will be reintroduced for electric private cars. The tax deduction will be capped at HK$97,500.

Tesla

A Tesla electric car on display in Hong Kong. Photo: Wikimedia Commons.

Under the new arrangement, a popular electric Tesla Model S60, originally around HK$600,000, would cost HK$380,000 extra in tax.

At a joint radio Q&A programme on Thursday, an audience member called in and said the government was heading backwards in terms of policy and that many who planned to switch to electric cars will have to reconsider.

In response, Chan said: “The main consideration was that the growth rate in car ownership was very high over the past few years.”

“If someone is buying electric cars for private use, yes they will have to pay more now, but the increase [in tax] is far less than the tax from buying expensive cars,” he said.

Paul Chan

Paul Chan Mo-po. Photo: GovHK.

But Chan was challenged by the hosts, who said that buyers would still purchase other types of cars if they really intended to – as tax for other types of vehicle did not increase. They said the new policy would hardly suppress the growth of cars.

Chan admitted the policy may not be enough and that it was only a first step.

A government source told Apple Daily that the government received HK$2 billion less in taxes because of the tax waiver between 2015 and 2016.

An Environmental Protection Department spokesman said the number of private cars increased by around 60,000 to 536,000 vehicles between 2013 and 2016, whilst electric cars increased in number from 314 to 6,694 during the same period.

Electric cars made up 7.3 per cent of newly registered cars last year, but they still represented a small portion of the fleet of private cars.

The spokesman added that the new tax regime has “taken account of the environmental merits of the wider use of electric vehicles as replacements for conventional vehicles, the increasing acceptance of electric private cars by drivers, and the substantial growth of the private car fleet in the last few years, leading to worsening traffic congestion.”

hong kong air pollution

Air pollution in Hong Kong. Photo: Wikimedia Commons.

Green group Clean Air Network said the new policy was a reasonable one in that it was necessary to increase the ratio of electric cars to reduce roadside pollution, but it was also necessary to manage the “out of control growth” of private cars.

Commercial vehicles

From 1 April 2017 until 31 March 2018, First Registration Tax of electric commercial vehicles, motor cycles and motor tricycles will continue to be fully waived.

The spokesman explained that the government’s priority was to replace conventional commercial vehicles – the major source of roadside pollution – with electric ones, thus the tax for commercial vehicles was still waived, and similarly for electric motor cycles and motor tricycles.

Private electric cars ordered by buyers from locally registered distributors or arranged for shipment to Hong Kong by owners before 11am Wednesday will still be entitled to have the tax fully waived, even if they are first registered after March 31.

A Tesla sales told Apple Daily that ten cars in store have been sold in half a day on Wednesday.

Buyer's tax for private electric cars will return due to overall increase in car ownership, says finance chief