The policy started April 1 and is expected to last until March 2018.
According to the Journal, the city capped the tax waiver at HK$97,500, which is $12,500 in the U.S. and is only applicable to first time owners. Prior to the change in policy, there were 2,939 first-time Tesla registrations in March and around five times that number in February.
Teslas already cost a lot more in China than the United States because of shipping and export costs, said Charlie Anderson, a senior research analyst at Dougherty & Co.
Without the tax benefit, it now costs HK$925,000 or $118,400 for a Tesla Model S in Hong Kong. Before, it cost HK$570,000 or $72,900 for the same model.
Anderson said that Tesla’s sales dip isn’t anything he hasn’t seen before and that registration statistics make it tough to get an a good pulse for the market.
“Just about every country has registration data, and I find it’s very hit and miss,” he said. “I think it’s probably for sure the case that demand has gone down from the tax incentive rolling off. It’s a classic case of elasticity of demand. If a good costs more people are going to buy less of it.”
A Tesla spokesperson described the change in Hong Kong as presenting “short-term challenges” and said the company “welcomes government policies that support our mission and make it easier for more people to buy electric vehicles, however, our business does not rely on it.”
The spokesperson went on to say “Hong Kong remains a significant market for Tesla and we continue to sell cars there each quarter.”
Tesla faces a similar challenge in Denmark, where sales of electric vehicles plunged 60.5 percent compared to the first three months of 2016, according to European Automobile Manufacturers Association. Denmark had long spared the electric car dealers from paying the 180 percent import tax on vehicles powered by a traditional car engine, but switched gears in fall 2015 to level the playing field. The country has since restored some of the subsidies, but the market still lags behind others.
Denmark’s neighbor Sweden has seen Tesla sales surge nearly 80 percent in the same time frame where the company has a partnership with local electric utility Skelleftea Kraft. The partnership offers Tesla Superchargers throughout the country with 100 percent renewable energy and free charging at home — a boon to customers who otherwise would have to pay increased electric bills.
But will Tesla soon face the same issue of reduced subsidies in the United States?
Tesla currently offers U.S. citizens a federal tax credit that roughly chops $7,500 off the sticker price of one of its models. So customers wanting to buy the company’s new more affordable Model 3, which started production on Friday, would pay $27,500 compared to the retail price of $35,000. Some states offer their own additional incentives.
But the federal tax incentive is designed to start fading out once a car manufacturer sells its 200,000th electric vehicle in the United States. Tesla has sold well over 100,000 cars and has roughly 400,000 reservations for the Model 3, according to Michelle Krebs, a senior analyst at AutoTrader, so a lot of those customers won’t be able to benefit from the tax incentive.
“We may face the same thing here in the U.S. because it’s not clear where tax credits will go,” Krebs said. “The challenge to Tesla is how to generate consumer demands without a tax credit. The tax credits have helped. But when they go away, what incentive is there for consumers to buy these cars? In California you get access to the HOV lines, but that might be going away.”
Tony Lim, an analyst at Kelley Blue Book previously told The Post that once Tesla eclipses the 200,000 car mark, the next calendar quarter will be the last quarter customers will be eligible for the full tax credit of $7,500. After that, it will be phased out over a 15-month period and new Tesla owners will be eligible for only 50 percent of the tax credit, and then 25 percent, and then none.