The cost of a Tesla is about to rocket in one of its hottest markets

Calvin Zhang was getting tired of his Maserati. The Italian sports car spent too much time with the mechanic and guzzled too much gasoline.
 
That bothered the Hong Kong investment banker, who’s also a trustee for the local World Wide Fund for Nature branch. So he replaced his Maserati with a Tesla Model S, capitalising on a law exempting electric vehicles from a tax on the purchase price that can reach 115 per cent.
 
Now Zhang, 45, is so hooked on the Tesla he doesn’t pay attention to the rest of his luxury fleet. “It’s just a fun car to drive,” he said. “I rarely drive my Aston Martin.”

 

The loophole encouraged wealthy drivers to make Hong Kong one of Tesla’s top markets. The city accounted for about 6 per cent of global sales of Model S sedans, according to Bloomberg Intelligence. Tesla Chairman and CEO Elon Musk last year called Hong Kong a beacon for electric vehicles.
 
That light now is in jeopardy of being extinguished. Hong Kong will start levying the new-car tax on private electric vehicles starting April 1 in an effort to reduce traffic congestion.
 
That will raise the price of electric cars by at least 50 per cent, said Mark Webb-Johnson, a Tesla owner and chairman of Charged Hong Kong, a group supporting the adoption of plug-in electric vehicles.

 
The Model S sticker price starts at HK$570,500 ($73,400), according to the Tesla website. Under the new tax, that will jump to HK$926,000, he said.
 
“It’s going to have a massive effect on the market,” Webb-Johnson said.
 
Palo Alto, California-based Tesla contends the imposition of the levy — known as the first registration tax — is a mistake. There are more than 8,000 electric vehicles of all brands in the city, according to the Environmental Protection Department, compared with less than 100 in 2010. “Almost all our new owners are replacing a particularly high-polluting fossil fuel vehicle,” the company said in an email. “This new policy threatens to move Hong Kong backwards.”

 
That uncertainty may prompt Tesla to boost its push into mainland China. While revenue there last year tripled to more than $1 billion, its cars make up just 4.3 per cent of China’s electric-vehicle market, according to Steve Man, a Hong Kong-based analyst with Bloomberg Intelligence.
 
Tesla’s bottom line received a jolt this month when Tencent Holdings, China’s biggest Internet company, bought a 5 per cent stake for $1.8 billion. Teaming up with the owner of the ubiquitous WeChat and QQ messaging services could help the automaker gain traction in a market where more than 200 companies have announced plans to build new-energy vehicles.

 
Warren Buffett-backed BYD is the nation’s biggest electric-vehicle brand, selling more than 102,000 units last year, according to Bloomberg New Energy Finance.
 
Even with the subsidy lapse, Hong Kong’s government said it isn’t withdrawing support of electric vehicles. The city will waive taxes on the first HK$97,500 of the car’s price and completely exempt commercial vehicles such as electric buses.
 
EV owners also get a break on their annual registration fee. The owner of a Tesla Model S 90D only pays about HK$1,000, compared with HK$7,664 for the owner of a Mercedes E400, according to Bloomberg Intelligence.

 
“Electric private cars can still be attractive,” Under Secretary for the Environment Christine Loh said in an email.
 
Even among environmental advocacy groups, the policy switch has support. Local think tank Civic Exchange said the government shouldn’t be offering tax breaks on car sales at a time when the city’s roads are getting more congested.
 
Tesla will start producing its Model 3, priced in the US at about $35,000, in July.
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