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Hong Kong introduces scrappage scheme for new EV buyers

A Tesla Model S parked on a street in Hong Kong.

Owners who scrap older ICE models will be eligible for a tax break on a portion of the EV’s registration tax

According to Hong Kong’s new budget, private car owners who trade in their internal combustion-engine (ICE) vehicles for electric ones will be eligible for a waiver on the first HK$250,000 (US$31,900) of the EV’s first registration tax.

The “one-for-one replacement” tax break will remain in place until 31 March, 2021. The scrapped model must be six years old or more, and the owner must have owned it for three years or more to qualify – measures designed to prevent rich owners from snapping up budget cars and availing themselves of a hefty discount.

Additionally, the state’s existing registration tax break of HK$97,500 (US$12,450) for new EV purchases will remain in place, Bloomberg reported.

Yet even with these new measures, EV advocates are questioning whether the incentives are working. The current vehicle tax break, brought in as part of Financial Secretary Paul Chan Mo-po’s budget a year ago, is a vast reduction from the previous waiver of all vehicle registration tax. As a result, the South China Morning Post reports that just 99 battery-electric models were sold in Hong Kong from April to December 2017, compared with 2,078 in the same period the year before.

Sales of Tesla, in particular, were hit badly by the decision.

The government has argued that taxpayers should not subsidise EVs purchased by rich owners, especially when more affordable models are now on the market. “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,” a government source told the Post.

Others have seen the policy sit uncomfortably with the territory’s wider drive to reduce both pollution and congestion, and its drive to encourage the use of public transport.

While a scrappage scheme is a positive step in the wider shift towards low-carbon transport – provided the safeguards hold – many have questioned whether it will be enough to revive the fortunes of a once booming market.


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