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Hong Kong First Registration Tax

Discussion in 'Hong Kong' started by markwj, Feb 20, 2014.

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What do you think will happen to the Hong Kong EV 0% FRT Tax Break?

Poll closed Feb 25, 2014.
  1. It won't get renewed and EV incentives will be dropped.

    0 vote(s)
    0.0%
  2. It won't get renewed, but EVs given a FRT break somewhere between 0% and the hybrid discounts.

    0 vote(s)
    0.0%
  3. It won't get renewed, but EVs given the same FRT break as hybrids.

    0 vote(s)
    0.0%
  4. It will get renewed for a short time (1 or 2 years).

    54.5%
  5. It will get renewed for another 5 years.

    45.5%
  1. markwj

    markwj Moderator, Asia Pacific

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    You are correct in that FRT has been used in recent years, as a disincentive, to slow the increase of private car ownership.

    However, as EVs have been exempted for approximately 20 years now, the FRT also clearly has an environmental component. Even hybrids used to get FRT tax breaks (until very recently).

    In most other countries, EV tax breaks have been used to offset the increased cost of the EV batteries, when compared to ICE vehicles. To make the cost of buying an EV comparable to that of an ICE.
     
  2. DITB

    DITB Charged.hk co-founder

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    FRT vs pollution could be relative to the amount of installed (and approved) seats or standing capacity, and for goods vehicles, by the approved maximum traffic load. Hence a bus with 100 seats and 50 standing places would be 150 passengers vs 4 passengers in a 5 seat car. Divide pollution by 30 then, if you compared a typical private car with a bus. Similar for trucks: Of course, a huge truck that can carry 30 tons will use more energy than a VW Caddy ...

    - - - Updated - - -

    Eventually, the full FRT exemption will be up for revising, especially as cars like the Tesla Model III and similar low end, long range EVs hit the market.

    By the time that revision is due, I strongly suggest we lobby for a gradual transition in the FRT exemption, rather than an overnight total cut-off.
     
  3. gubes

    gubes Member

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    Yes. Step 1 is to get as many EVs or zero to extremely low emmission vehicles on the road via tax incentives (that are for the most part revenue neutral). This is the easiest thing to do if you structure the taxes right. This now centralizes the emmissions problem to a handful of coal fired power stations. Step 2 would be how to transition away from coal-fired to natural gas and other renewables. This one is more difficult due to cost.

    Step 1 can be revenue neutral, but Step 2 will cost money no matter how you cut it. But the cost in the long run is definitely worth it. The political will to do so is another matter.
     
  4. markwj

    markwj Moderator, Asia Pacific

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    Step 1 and Step 2 can, and do, occur simultaneously. Electricity generation in HK has already gotten much cleaner in the past 10 years or so, and the plan is for that to continue.

    However, with the Nuclear being the only short term option, and the Japan disaster in people's minds, that has been delayed. The current approach is to switch to LPG, which is cleaner than coal, but (a) more costly (except for one limited supply), and (b) still not renewable.
     
  5. DITB

    DITB Charged.hk co-founder

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    Hong Kong has a lot of mountains very suitable for wind power. And islands. As well as an almost endless amount of ugly gray concrete surfaces, and rooftops unused. These could and should all be plastered with solar panels, feeding into the grid.

    Not only would much more electricity be green, but all this energy will be injected locally, where it is needed, rather than transported from far away power plants.

    All we need is for the laws to change, to accommodate this development. Private investors and companies will take care of building it, but the law must be in favour of such installations.
     
  6. gubes

    gubes Member

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    Agree in sentiment. Just bear in mind that these things are very difficult and expensive to do. Investors will only invest if they can make a good return. With electricity prices at US$0.18/kwh or HK$1.40/kwh, Wind power won't make money unless electricity prices are higher and/or the HK government is willing to subsidize the cost substantially. Wind can be installed in mountainous areas but that also costs more money too. Solar rooftops are less economic in HK versus places like California or Australia for a simple reason. A large portion of households live in detached houses in those countries - so each rooftop installation would serve 1 household. In Hong Kong, the vast majority of households reside in multi story residential apartment blocks - meaning that each rooftop installation needs to serve anywhere from 40-150 households. Also important to understand the intermittent nature of the energy output - meaning you would need battery storage in conjunction with renewables to make them suitable for base load delivery - all of which adds to the cost.

    That doesn't mean that the HK government shouldn't be doing more. Currently HK Electric and CLP earn regulated returns of 10% on their coal fired plants. When these contracts expire, the government should lower the regulated return on coal fired plants to indirectly fund the expansion of renewable energy initiatives. They should also adjust the regulated return based on the level of CO2 and NOx emissions output per kwh.
     
  7. lx3h

    lx3h Charged.hk's Director of Education

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    #107 lx3h, Nov 10, 2015
    Last edited by a moderator: Mar 13, 2016
  8. waidy

    waidy Member

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    I am only 25+ minutes into the video. Why would Dr Hon Fernando CHEUNG Chiu-hung not get an EV to transport her daughter? The disable of her daughter could well be caused by the environment (the mother breaths in dirty road side air while carrying her daughter :)
     
  9. markwj

    markwj Moderator, Asia Pacific

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    But, the regulation is that the return for HKE and CLP is based on the amount of their investments. The more they invest, the bigger return. Also, renewal investments, under regulation, get a bigger return? Perhaps the concern is that these regulation arrangements are up for renewal / renegotiation, so hard to make a long term investment?
     
  10. lx3h

    lx3h Charged.hk's Director of Education

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    Exactly, and what has he done for her daughter in the environmental aspect? Problem of ageing among Hong Kong, says lawmaker | South China Morning Post

    And if he isn't sure the effectiveness of the FRT waiver for EV, I will tell him to go and ask those people who work and queue up at the Cross Harbour Tunnel, eg. tunnel staff, bus company staff, bus passengers, ask them if it will make a difference to them if 10, 20, 50% of the cars are EVs.

    I admire what he has done for the poor as a social worker, but I can't agree on his lack of vision in helping the poor. A lot of the poor in Hong Kong live in regions with poor air quality, i.e. Sham Shui Po area and even roadsides. How can he not never considers that these people have to right to breathe clean air and not be ill because of air quality? So he fights for their medical subsidy, treat them then put them back to where they get ill?

    There are over 780,000 cars in Hong Kong and only 3000 are EVs. Since the Transport Department has not given FRT waiver to 99.62% of the cars in Hong Kong, not earning FRT from the remaining 0.38 % of EVs in Hong Kong because we produce cleaner air not just for his daughter, but for all Hong Kong citizens, is it not worth it?

    Also, how does he know that FRT charged by TD actually goes to social welfare or medical subsidy directly? Is it how Hong Kong government's finance work?
     
  11. Titus

    Titus Member

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    We can't convince HK people about the benefits of clean air until it is quantified in numbers.... what I suggest (sorry I'm no expert with contacts with the scientific community) for research to present numbers is:

    - Is there any studies correlating amount of CO2/pollution in the air and number of people with asthma attacks?
    - If there is, then we can present numbers by: # of EVs removing X amount of pollution = reduction in Y number of people who needs medical attention = money saved for that medical care
    - Or reduction of Y number of children born in HK with respiratory illnesses

    For businesses, we need to make them see the $$$ in it:
    - Any study of foreign tourists who said they avoided HK as a tourist destination because of pollution?
    - If there is, then we can present numbers by X amount of tourism dollars increased with EV reducing Y amount of pollution
    - Similarly, HR/head hunting companies probably have research on number of companies who had problems hiring expats into HK because of the pollution issue. We can show a $ connection.

    All of our explanations and push for the media telling them clean air is great, but unfortunately people don't react until they see direct figures connecting their health OR MONEY in this city LOL
     
  12. markwj

    markwj Moderator, Asia Pacific

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    EPD has a huge amount on this.

    For an overview, see: Air | Environmental Protection Department

    The EPD study: Study of Economic Aspects of Ambient Air Pollution on Health Effects | Environmental Protection Department

    And then there is the HKU study: Hong Kong air pollution causes 3,000 deaths, costs billions annually | South China Morning Post

    And for those that say EVs don't help because they just shift the emissions from cars to dirty coal power stations:

    air_images07_2014.jpg
    25 years. Electricity generation doubles, emissions go down 80%.
     
  13. Titus

    Titus Member

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    Geez then I don't know WHAT else will convince people/government/businesses if 3000 deaths and 39 billion dollars cannot... :mad:
     
  14. gubes

    gubes Member

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    #114 gubes, Nov 13, 2015
    Last edited: Nov 13, 2015
    As at the end of August, 2015, there were 557,364 of registered private cars in Hong Kong. There were also "over" 2,000 registered Teslas.

    The number of cars on the road has INCREASED by 45% since September 2004!

    As a theoretical exercise, if we assumed that one day all of these cars were electric and did 7,500km per year on average (which is purely a guess) and had mileage of 250wh/km, the additional electricity needed from the grid would be equal to 1,050GWh of additional electricity needed. Currently, Hong Kong produces 45,000Gwh. That is only an increase of 2%. Even if I assumed that people did double the mileage it would only be 4%.

    Pretty amazing when you think about it. You could easily, over time, satisfy that extra 2% via wind power. Even if you allowed the tarriff from wind to be 2x the grid rate, the overall cost of electricity would only rise by 2%!!

    That is for privately registered vehicles. I think there are over 700,000 total vehicles once you include buses, taxis etc. Granted those extra 200,000 vehicles consume more energy due to mileage, weight etc - but if all of HK's vechiles went electric, I highly doubt that overall consumption of electricity would exceed 5 or 6% more than what we do today.
     
  15. DITB

    DITB Charged.hk co-founder

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    Very good point!

    Of course, it would be obstructed by people saying it will kill birds, and make mountain ranges "unsightly". There are so many smaller islands around Hong Kong, with no-one living there. There is no-one to disturb with noise. The wind is much more constant. Land isn't used anyway. Just need a cable to route the electricity into the city.

    The more varied the renewable energy supply is, the more stable (and less need for fossil fuel backup). Solar only works during the day. Wind only works when it's windy (obviously !). Add in electric generation from the reservoirs - pump the water back on windy nights, have a backup when it's overcast/night/no wind.

    A lot of solutions are possible, but it's all driven mainly by three things: Money, money and money.
     
  16. DITB

    DITB Charged.hk co-founder

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    #116 DITB, Jan 2, 2016
    Last edited: Jan 2, 2016
    As EVs are coming along faster in HK now, there will be more and more opposition to keep the FRT exemption as it is.

    As suggested earlier, an abrupt change from 0% to 100% FRT overnight would totally kill further progress. On the other hand, full exemption cannot be expected to continue forever, despite the history of HK SAR incentives.

    Hopefully, the Model X will hit Hong Kong before March 31, 2017. In March 2014, three years out seemed far into the future (see the beginning of this thread). With just over a year to go for the next possible extension, we should start lobbying for a solution that will be digestable to the LegCo majority. Now that we are getting the Formula E to Hong Kong this fall of 2016, cancelling the FRT exemption altogether would be quite embarrassing for Hong Kong.

    One suggestion could be to introduce a gradual FRT, starting from April 1st, 2017:

    1) The rest of 2017 should continue as FRT exempt

    2) Starting January 1st, 2018, the FRT for any EV should be 1% off of what it would have been if not exempt. For every calendar month following, this percentage would increase by 1%

    This would mean that by April 1st 2026, EVs would have to pay the same FRT as other cars.

    By the time the Model III hits the market, FRT would be 10-20% of full FRT (depends on how the "Tesla Calendar" aligns with the Gregorian calendar!)

    FRT Exemption - proposed phase-out 2018-2026.png

    The reason it is so important with a sliding phasing out is to avoid rushed transactions, followed by a total stall in the EV process. One percent per month is so gradual that it will be enough for people to act faster, yet not so punitive for those not making a specific deadline. The process of changing ICEVs into EVs will be even further accelerated, in a sustainable way, while increasing revenue to HK SAR.

    In fact, if the whole purpose of the FRT exemption is to get EVs here as fast as possible, a gradual increase could prove even more effective than a constant total exemption, as it encourages people to switch over this month, rather than at a later stage.

    -

    Eventually, a pollution tax could be added to the FRT of any car into Hong Kong. This would mean that even in 2026, there will be an advantage of choosing an EV over a fossil fuel car. The logic and fairness would be: You pollute, you pay.

    Congestion issues is a separate matter, which is being dealt with by the HK SAR at this stage. No matter which vehicle, and how much or little it pollutes, it still takes up space when it's driving. GPS based road tax, with variable rates by location and time, could prove very efficient for Hong Kong. Also, more emphasis on electronic/internet processing of paperwork of all sorts, will reduce the need for people to actually drive somewhere.

    -

    I think this was brought up before, just quoting it in to keep the text.

    From LCQ9: Exemption of payment of first registration tax for electric vehicles , see the bottom of this post.

     
  17. DITB

    DITB Charged.hk co-founder

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    It's important that we find a solution to agree upon - then fine tune it, and present it to the appropriate lawmakers - in due time before 2017.

    Having a pre-fabricated solution, even written in "law-speak", would make it easier for both opinions to accept it:

    1) It's already written and prepared for becoming law
    2) It will ensure more revenue starts coming in from EVs, gradually
    3) It will keep, or even accelerate further, the process of ICEVs->EVs
    4) It's fair, transparent and predictable. EV sellers, EV charging station networks, electric companies, estates, shopping centres, parking lots and finally - present and future EV owners - can make sensible decisions and investments.


    I am not well experienced in "law-speak", and might not have foreseen all issues with the proposed gradual increase. Please chip in, help make a digestible solution well before March 2017.
     
  18. Lerxt

    Lerxt Active Member

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    Why on earth would you propose this? It's insanity. How about proposing they keep it off and make HK the first fully electric city? Do us a favour and keep away from Legco.
     
  19. Vmax

    Vmax Member

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    Only when the same FRT percentage, which might be imposed on EVs will be added to the existing FRT for ICEs cars as well, EVs will have a chance to succeed here. Ultimately the majority of owners care about money first and and clean air as a distant second.
     
  20. DITB

    DITB Charged.hk co-founder

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    Lerxt,

    To be realistic, we risk that the FRT exemption will be entirely abandoned in 2017. There are strong forces in government who are trying to cancel it entirely. This measure is meeting them and mitigating this risk - providing a fair solution.

    But I am posting it here, to encourage discussion, and there is your viewpoint. I agree, it would be nice to keep it as it is, for another 3, or even 5 years. We will discuss it in Charged.hk, and gauge some of our contacts in LegCo (they can tell us how the odds are for another extension).
     

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