In Hong Kong, the government’s tax waiver scheme has been a significant driving force in promoting the adoption of electric vehicles (EVs) within the city. However, there are concerns that if the government decides to scrap or drastically reduce the tax waiver, it could dampen buyers’ enthusiasm for switching to EVs. This would be in direct contradiction to the government’s policy goals of pushing for greater EV adoption, especially considering that EV adoption rate currently stands at a low 7 percent.
Under the tax break scheme, buyers who made the switch from internal combustion cars to electric ones enjoyed a tax break of up to HK$287,500 (US$36,747) since 2018. This incentive was much larger compared to the tax waiver of up to HK$97,500 provided to buyers of electric cars during the initial vehicle registration.
The government’s commitment to achieving carbon neutrality by 2050 and protecting the environment was outlined in its 2021 road map. As part of this plan, the government introduced several measures to popularize EVs and phase out new purchases of internal combustion cars by 2035. These efforts have yielded positive results, with electric cars accounting for a significant 64.3 percent of new registrations during the first eight months of this year, a substantial increase from the 6.3 percent recorded in 2019.
However, recent government figures indicate that the amount of tax waivers granted totaled HK$4.85 billion for the first eight months of 2023, compared to HK$5.3 billion the previous year. Between 2020 and 2022, first registration tax concessions were provided to 34,445 buyers, with nearly all of them replacing their old petrol vehicles. Among the electric car brands, Tesla emerged as the most popular, holding a 70 percent share of the total, followed by Mercedes-Benz and BMW.
While the tax break scheme has been widely praised by buyers, there have been concerns expressed regarding its potential discontinuation. Ringo Lee Yiu-pui, the honorary life president of the Hong Kong Automobile Association, emphasizes that without the replacement scheme, achieving the government’s zero roadside emissions goal would become more challenging. Lee warns that some car owners may choose to continue driving or even purchase new fossil-fueled cars if such incentives are halted, undermining the government’s efforts to promote wider EV adoption. He suggests that the government’s 2035 target for phasing out fossil-fueled private cars may need to be postponed in this scenario.
To avoid market disruptions and an inefficient use of resources, Lau, from the Hong Kong Automobile Association, proposes a gradual reduction of the tax break by 10 percent each year over the next decade. This approach would continue to drive EV adoption while also generating income for the government amid declining revenues.
Locky Law, the director of education at ChargedHK, a non-profit organization promoting cleaner air through EV use, supports this idea. If the replacement scheme is scrapped, Law suggests that the government should introduce other incentives to encourage buyers to choose electric cars. Similarly, Alex Hung Man-ching, the founding chairman of the Hong Kong New Emerging Technology Education Association, believes that the discontinuation of the scheme would slow down the city’s EV adoption rate. Hung highlights that the scheme has a ripple effect, incentivizing more people to switch to EVs and encouraging increased investment in charging facilities—an essential aspect of accelerating full EV adoption. He cites neighboring Shenzhen’s approach of providing charging stations at every parking space as a lesson that Hong Kong should consider.
As of last month, Hong Kong had 7,085 EV chargers available for public use, including 3,950 medium chargers and 1,092 quick chargers, roughly one for every 10 vehicles. However, it remains crucial for the government to strike a balance between adjusting the tax break scheme and supporting the growth of charging infrastructure.
In response to inquiries about the future of the scheme, a spokeswoman for the Environment and Ecology Bureau confirmed that adjustments would be made at an appropriate time.
Overall, stakeholders and industry experts stress the importance of maintaining incentives for EV adoption to ensure continued progress in reducing emissions and achieving environmental goals. They highlight that abruptly scrapping or significantly reducing the tax waiver scheme could disrupt the market, affect car makers’ production plans, and hinder the healthy development of the EV market. Therefore, a gradual adjustment of the scheme over a more extended period is advocated to facilitate a smoother transition towards a greener transportation system in Hong Kong.