2017 FRT Renewal

[markwj]

Cancelling all EV tax incentive would pretty much kill demand for EVs in HK. Another way the HK Govt could go is to allow FRT waiver or incentive on an application basis, similar to the Environmentally Friendly Vehicles incentive.

That scheme had an interesting and very simple way of limiting the financial impact - a total cap. So, the FRT exemption was given (30% in that case), but capped at HK$50k.

It seems that the biggest objection to the FRT exemption for EVs in HK is the 'subsidies for the rich' argument. While I disagree with the basis of that argument, such a cap would be very workable, would address the issue effectively, and would allow for a gradual phase out of incentives. I still think it is too early to phase out these incentives, but a reasonable cap (for example, starting at around HK$500k of pre-tax vehicle cost) would be better than an outright cancellation. I just worry that what happened in Denmark would repeat in Hong Kong. There are simply too many barriers to EV adoption here for it to survive without incentives.

That said, the Environmentally Friendly Vehicles incentive was bizarrely implemented. First introduced in 2007, it gave 30% exemption up to HK$50k. Then, in 2011 it was increased to 45% and HK$75k cap. Then in 2015 it was abruptly cancelled. At the time, the government said they wanted to focus the incentives on pure EVs. That is not a gradual phasing out.

As to why I don't buy the 'subsidies for the rich' argument; I fail to see any evidence that the rich don't need these as an incentive to choose an EV over an ICE vehicle. I would simply rather a rich man choose an EV ferrari over a petrol equivalent, and have no confidence that he will do so without an incentive.

 

[punter]

All of your logic is impeccable and well thought out. The catch is that in matter of government, logic often doesn't win. Any extension of the FRT in any form will need some sort of positive action by Legco, which seems not at all focused on anything to do with policy at the moment, and is completely disfunctional. Furthermore, there is a hypersensitivity in government about any policies which are seen to favour the wealthy - government land leases to private clubs, LCSD leases on beach facilities to premium restaurants, like in South Bay. Legislators have already grilled the transport department on this being a subsidy for expensive sports cars. I just don't see the government as likely to tackle these obstacles, and so being a betting man, my money says that the FRT goes away and Tesla FRT reverts to full levels on 1 April. Indeed I have put my money where my mouth is - I would never spend $880k for a car, as I have done for this one. It is only because I am playing the odds here and expect FRT to be reinstated, meaning that I can use a wonderful car for a few years and sell it back for what I paid for it. Yes you might have guessed it - I am indeed a trader.

 

[mkq786]

However i don't think that it will be fully abolished. While i do like my car's resale value to go up but restoring standard FRT is definitely going to hurt this whole initiative. They could restart with marginal percentage say 10-20% or so at max if at all they would like to increase. I am sure TESLA guys were also in discussion with GOVT and that's why such news like HK is a beacon city for EV.... to pur further pressure on GOVT. Lets hope for the best

 

[markwj]

All of your logic is impeccable and well thought out. The catch is that in matter of government, logic often doesn't win. Any extension of the FRT in any form will need some sort of positive action by Legco, which seems not at all focused on anything to do with policy at the moment, and is completely disfunctional. Furthermore, there is a hypersensitivity in government about any policies which are seen to favour the wealthy - government land leases to private clubs, LCSD leases on beach facilities to premium restaurants, like in South Bay. Legislators have already grilled the transport department on this being a subsidy for expensive sports cars. I just don't see the government as likely to tackle these obstacles

Looking back three years, the situation was exactly the same. At that time, the government proposed an extension of FRT exemption for three more years, and it was passed by majority in LegCo. Similarly, recently the private club land leases have been renewed for 15 more years. These extreme legislators can spit and shout, as they did back in 2014, but the reality is that it comes down to whether the government has the cojones to see this 20 year old policy through, or abandon it due to some whining politicians merely trying to solidify their own position with their rhetoric. I can only hope that they do the right thing.

so being a betting man, my money says that the FRT goes away and Tesla FRT reverts to full levels on 1 April. Indeed I have put my money where my mouth is - I would never spend $880k for a car, as I have done for this one. It is only because I am playing the odds here and expect FRT to be reinstated, meaning that I can use a wonderful car for a few years and sell it back for what I paid for it. Yes you might have guessed it - I am indeed a trader

That, I am not so sure of. If the FRT exemption is allowed to expire, outright, then will the value of existing EVs in Hong Kong really rise substantially? Double? Did the price of a Prius jump up HK$75,000 after the government cancelled the Environmentally Friendly Vehicle incentive back in 2015? I highly doubt it. Rather, I think the entire market for EVs will collapse, and people will go back to buying polluting petrol vehicles. The charging situation is just too difficult here.

The best view we have of what will happen if HK loses it's FRT incentive is Denmark. In 2015, with similar tax incentives to HK, about 2,800 Teslas were sold. Then the incentive cancellation started (the first year of five rollbacks from 100% to 0%, 20% a year). In the first three months of 2016 only 2 (two) Teslas, and a handful of other EVs, were sold in Denmark. The value of used EVs didn't appreciate to any noticeable extent.

 

[FequalsMA]

The best view we have of what will happen if HK loses it's FRT incentive is Denmark. In 2015, with similar tax incentives to HK, about 2,800 Teslas were sold. Then the incentive cancellation started (the first year of five rollbacks from 100% to 0%, 20% a year). In the first three months of 2016 only 2 (two) Teslas, and a handful of other EVs, were sold in Denmark. The value of used EVs didn't appreciate to any noticeable extent.

All the Tesla vehicles in the city would instantly become harsh reminders of a time where the company commanded such high market penetration.

 

[Lerxt]

Any tax increase will kill Tesla in HK along with our car values. The blame will lie in the hands of Legco and those who for some reason thought it would be a good idea to give them the idea to raise it.

 

[smtung]

10/20% FRT won't hurt.Can't imagine the response from the public if a Porsche/Jaguar EV is tax free.

 

[markwj]

10/20% FRT won't hurt.Can't imagine the response from the public if a Porsche/Jaguar EV is tax free.

20% killed EV sales in Denmark.

 

[Titus]

As a 1 year owner who had to wait for Supercharger at 6:20am this morning (while the medium charger near my office is being upgraded for next 3 weeks), I selfishly say maybe FRT would allow the charging infrastructure to catch up to number of EVs already in HK.... as of now I tell anyone I know they should NOT get an EV unless they don't drive for more than 30kms a day or have home charging access.

 

[Optic]

As a 1 year owner who had to wait for Supercharger at 6:20am this morning (while the medium charger near my office is being upgraded for next 3 weeks), I selfishly say maybe FRT would allow the charging infrastructure to catch up to number of EVs already in HK.... as of now I tell anyone I know they should NOT get an EV unless they don't drive for more than 30kms a day or have home charging access.

They should put the FRT revenue back into renewable energy or install/upkeep chargers. SCs are getting useless at this point.

 

[Matador]

That scheme had an interesting and very simple way of limiting the financial impact - a total cap. So, the FRT exemption was given (30% in that case), but capped at HK$50k.

It seems that the biggest objection to the FRT exemption for EVs in HK is the 'subsidies for the rich' argument. While I disagree with the basis of that argument, such a cap would be very workable, would address the issue effectively, and would allow for a gradual phase out of incentives. I still think it is too early to phase out these incentives, but a reasonable cap (for example, starting at around HK$500k of pre-tax vehicle cost) would be better than an outright cancellation. I just worry that what happened in Denmark would repeat in Hong Kong. There are simply too many barriers to EV adoption here for it to survive without incentives.

That said, the Environmentally Friendly Vehicles incentive was bizarrely implemented. First introduced in 2007, it gave 30% exemption up to HK$50k. Then, in 2011 it was increased to 45% and HK$75k cap. Then in 2015 it was abruptly cancelled. At the time, the government said they wanted to focus the incentives on pure EVs. That is not a gradual phasing out.

As to why I don't buy the 'subsidies for the rich' argument; I fail to see any evidence that the rich don't need these as an incentive to choose an EV over an ICE vehicle. I would simply rather a rich man choose an EV ferrari over a petrol equivalent, and have no confidence that he will do so without an incentive.

EV adoption and subsequent reduction in air pollution etc is an ideal goal.
Unfortunately, I have to say most HK people purchase Tesla not because of the sake of environmental friendly issue.
It's in fact all about money: FRT exemption, savings in petrol.
A lot of them are also attracted by the design and technology of course.

As a result most would accept sacrificing time and convenience in finding spots for charing their car in exchange of the above.

I would bet, for majority of the current EV owners, lets say if there are two new cars available in front of you, one being an EV while one being an ICE, both equipped with similar current EV technology and most importantly similar cost, a lot of them may switch back to ICE instead.

Another scenario is, if petrol price drops significantly to a level that is almost comparable to price of electricity, a lot of current EV users may also switch back to ICE.

The reason being, not many of them really care about issues of environmental protection etc actually.

That is the reality.

 

[Vmax]

@Matador: unfortunately I have to agree with your assumption

 

[markwj]

@Matador: unfortunately I have to agree with your assumption

Me too. But not necessarily a bad thing, so long as the incentives are in place to make them choose the EV. Bottom line: I don't care the reason why they chose to drive an EV (environmental consciousness, brand, cheaper to run, tax incentive, whatever) - all I care about is that they choose the EV over the ICE.

 

[Titus]

EV adoption and subsequent reduction in air pollution etc is an ideal goal.
Unfortunately, I have to say most HK people purchase Tesla not because of the sake of environmental friendly issue.
It's in fact all about money: FRT exemption, savings in petrol.
A lot of them are also attracted by the design and technology of course.

As a result most would accept sacrificing time and convenience in finding spots for charing their car in exchange of the above.

I would bet, for majority of the current EV owners, lets say if there are two new cars available in front of you, one being an EV while one being an ICE, both equipped with similar current EV technology and most importantly similar cost, a lot of them may switch back to ICE instead.

Another scenario is, if petrol price drops significantly to a level that is almost comparable to price of electricity, a lot of current EV users may also switch back to ICE.

The reason being, not many of them really care about issues of environmental protection etc actually.

That is the reality.

I'll be first to raise my hand LOL not going to be self righteous liar... free charging, free parking at some places, thousands of HKD less annual road registration fees, tens of thousands of HKD cheaper to maintain. hundreds of thousands of HKD cheaper due to FRT exemption for similar size/performance ICE cars.... sorry environmentally friendliness was not on the list of things that attracted me to buy an EV in HK.

The good thing though is I doubt gasoline prices in HK will ever drop to electricity per km/kwh level. So inherently there are still some very attractive points about EVs even if the FRT exemption is gone. Lexus charged me 6k HKD per service (every 7500kms) and that's BEFORE the cost of fluids change, it's just a "check up" that if you don't do you will lose your warranty; so looking at around 8k+ HKD every 7500km. My Model S has incurred me 4k HKD after FORTY THOUSAND kms in maintenance.... For similar performance I would need a 4+ liter NA V8 or at least a 3+ liter FI engine in an ICE... annual road fees on those would be 7k to 11k HKD a year I think, compared to the 900 HKD for an EV. Penny pinchers like myself will still go for EVs, regardless of environmental friendliness or FRT... IMO.

Will just have sales people work harder in their pitches, but sooner or later people will realize there is a net savings on a EV compared to ICE; especially as the tech matures and the build quality gets more consistent without reports of EV owners going on weeks or months without a car due to software/hardware glitches.

 

[Lerxt]

We'll be able to thank ChargedHK for giving the govt ideas on how to raise taxes and kill the EV in HK.

 

[markwj]

We'll be able to thank ChargedHK for giving the govt ideas on how to raise taxes and kill the EV in HK.

Huh? We've spent the last two years campaigning to renew the FRT exemption for EVs. Our government is more than capable of dreaming up ways to tax us all, without any external help.

 

[markwj]

We'll be able to thank ChargedHK for giving the govt ideas on how to raise taxes and kill the EV in HK.

I really don't like this assertion. It is groundless, accusatory, and just plain wrong. It is also incredibly disrespectful to all the people who have donated so much of their time and effort towards promoting and helping EV adoption in Hong Kong. Not impressed.

FYI: Here is the Charged.HK submission to government, with suggestions for the policy address, submitted last month. It points out clearly Charged.HK policy and recommendations. We have been driving this message home in countless meetings with Government departments, Legislative Councillors, Property Managers, etc.

Policy Address 2017 - Charged.HK Submission

Support for Electric Vehicles in Hong Kong

As the situation with the air quality of Hong Kong continues to deteriorate, and Hong Kong continues to lose out to competing countries such as Singapore in surveys and opinion polls on this subject, we urge the Hong Kong government to increase efforts in this respect. According to the Hedley Index, in 2015 there were 2,196 premature deaths, 146k hospital bed days and 3.5m doctor visits caused by air pollution. Total economic loss was HK$27.5 billion.

We have the following suggestions for the 2017-2017 budget and 2017 policy address:

1. Purchasers of Electric Vehicles in Hong Kong currently enjoy a 100% exemption for First Registration Tax of new vehicles. This policy has been in place for more than 20 years now, but is due to expire on 31st March 2017. This policy is finally working, and recent years have seen a dramatic increase in the number of Electric Vehicles on our roads; replacing polluting petrol vehicles. As electric vehicles are still significantly more expensive than polluting petrol equivalents, we urge the government to simply renew the exemption for a further 3 years, to allow time for the cost of electric vehicles to come down. Before those 3 years are up, we also urge the government to introduce a clear timeline and plan for such tax incentives, as the current expire/renew cycle of uncertainty is harming confidence in the industry. It is important that the fledgling electric vehicle industry, as well as purchasers of the vehicles, have a clear commitment from government to support this growing trend.
   
   We should heed the situation in Denmark as a warning sign: Since 1985, Denmark has had 0% new car registration tax for Electric Vehicles. In 2015, there were an average of 377 electric vehicles sold per month. Then, in 2016 the Danish government started a phased introduction of tax on electric vehicles (increasing 20% each year, up to 100% over five years). With just a first year 20% tax, so far in 2016 we have seen the average number of electric vehicles sold plummet to just 51 per month - 85% less than the previous tax-free year. It is clear that the market for electric vehicles is extremely price and tax sensitive at the moment. It is simply too soon to remove these incentives; which are required to balance the established and globally heavily subsidised, petroleum and internal combustion engine vehicle industries.
   
   
2. The single biggest issue facing electric vehicle users in Hong Kong is the lack of home apartment and workplace car park charging facilities. Vehicle owners are willing and eager to install chargers in their own home or office car parks, but the buildings management (BM) companies and owners corporations (OC) block such installations - in particular where the installations must interface or pass through common areas of the building. There is quite simply no incentive for BM or OC to permit such installations, and they see only risks and extra workload. Our Hong Kong Government has done a fantastic job for new buildings (with the GFA concession being tied to EV enabling car parks), but nothing substantial has been done for existing buildings.
   
   The solution for home and office car park charging being increasingly adopted overseas is to provide either legislative or regulatory support for the owners of a car park to have the legal right to install an electric vehicle charging station in his own car park space (including the right to access common areas and facilities). Such rights are conditional on aspects such as registered contracts being used, third party liability insurance coverage obtained, all costs being borne by the car park owner, and there being sufficient electrical power for the installation. We urge Hong Kong to adopt such a framework.
   
   We also urge government to consider the introduction of a fund for EV enabling existing buildings. Such a fund could be in the form of either cost sharing or interest free loan. The fund would be used to kickstart the process of enabling installation of EV charging facilities in existing buildings by incentivising BM and OC to be early adopters (thus able to take advantage of the fund) rather than continue delaying (as the fund will run out after its term expires).
   
   
3. On the subject of public charging, the government car parks around Hong Kong provide electric vehicle charging facilities. Such facilities are not dedicated to electric vehicle charging (so that the car park spaces are taken by petrol vehicles and unavailable to electric vehicles). We urge the government to dedicate those spaces to electric vehicle charging and to continue the deployment of medium speed chargers to government facilities.
   
   
4. Several countries around the world are now announcing commitments to ban the sale of internal combustion engine vehicles. This sends a strong message to the industry, and a timeline for the transition to sustainable transportation. We urge the Hong Kong Government to also announce a date at which time first registration of internal combustion engine vehicles will not be permitted. Perhaps 2030.
   
   
5. Electric Vehicles, while reducing roadside emissions to zero, are still affected by the cleanliness of the electricity grid used to power them. We urge the government to continue in its commitments to reducing emissions (both RSP and CO2), by moving to a more sustainable and renewable fuel mix.
   
   Local power companies (CLP and HKE) must be incentivised to move to a cleaner fuel mix, and to support alternative methods of supplementing the grid. In particular, a feed-in-tariff must be introduced, and support provided, for private solar/wind facilities. CLP and HKE must be incentivised to support such facilities. The lack of solar/wind power in Hong Kong is deplorable; especially given the success and growth of this elsewhere around the world. Hong Kong has fallen woefully behind in this respect, and changes need to be made now to support this.

We thank our government for its policy support for electric vehicles and a cleaner environment. We trust that this support will continue, and indeed be strengthened.

 

[dlty]

Mark - Very well said. Know that there are others who appreciate what you and Charged.HK are doing for HK.

 

[FishHead]

Mark, thank you to you and others who have worked towards the adoption of EV's in Hong Kong. With many more countries pushing for EV's, and established manufacturers finally taking EV's seriously, I think it is a matter of time before the wider adoption of EV's in Hong Kong and elsewhere. As point (2) of the policy address has mentioned, I believe the single biggest issue is the lack of home charging facilities. Once this is widespread and with the improvement of battery technology and range, there will be an increased uptake of EV's.

All kudos to Tesla for its Model S which finally showed that it is possible for an EV to be good looking with a fantastic performance and ride and range. As someone who has previously driven Honda, BMW, Mercedes and Porsche(and still drives a Porsche which is spending more time in the garage than on the road after I got the Model S), I can honestly say that the Model S is the most compelling vehicle I have driven. It is just amazingly good. Sure it has its quirks and some examples have quality issues, but overall it is a fantastic car to own and to drive. Tesla has disrupted the automobile industry in the same way that the iPhone disrupted the mobile phone industry. Exciting times ahead!

 

[Vmax]

Thanks to Mark and charged.hk for the continuous efforts to promote EVs and keep the FRT exemption in Hong Kong.