Saturday, June 24, 2017

(Hong Kong) Misguided policy on Electric Vehicle

To Carrie Lam (mostly),

    I would like to react to the unfortunate decision of stopping the new car registration tax credit for EV (Electric Vehicles). While many have rightfully commented on how unadvisable this action from the prior administration was, I thought appropriate to support these comments with factual evidences, then, suggest better ways to achieve the goal of stabilizing or even reducing the ratio of private car to driving population in Hong Kong.

First, let’s take a look at the statistics for pre-EV tax-credits below:

Inline images 1
New private car registration 1981-1997 (above). Pre-EV tax credit (1997). Observe the trend-line.

Inline images 2
Then, let’s observe the new car registration 1997-2017 above, with the EV tax credit in effect. Note that the new car registration is actually growing at a slower pace. Provided there was no significant competitor in the EV market before the past 4 years, let’s not draw a final conclusion quite yet. However, this is certainly an indication that the long term trend does not support the action taken by the previous administration and that it couldn’t have been rooted in a serious analysis.

Inline images 3Src:
Now let’s observe the Tesla influence on new EV car registration (above). There was a huge pick-up from 2014, about a year into the Tesla model S introduction in Hong Kong. Understandably enough as Tesla introduced a luxury, high performance sedan car, which directly competes with the most popular brands sold in Hong Kong.
Now, did that correlate to a spike in new car registrations?

Inline images 4
Resounding no as the chart above shows! For the same period, for all new car registrations, no spike in the overall private car sales. Obviously, what happened is that Tesla EVs displaced non-EV luxury cars, as evidenced in the private car sales figures for April 2017, which are back to usual numbers, while Tesla have not sold any…
Now, there you have it, a policy not guided by facts, but then, what was the driver? Could it be the European luxury car makers’ lobby’s influence? Who knows…
In any case, this policy error can be repaired easily and efficiently. So, how would the new Hong Kong administration act to slow-down progression of private car sales?
In his June 18th piece for the SCMP, Mike Rowse suggests to cap the number of private vehicle. Maybe we’ll need to get there eventually. However, I think that the current issue has to do with insufficient tax de-incentives. There are many ways for the new administration to tax the private cars appropriately:
·         Have a hefty, non-creditable base tax
·         Double the current taxes, with half being modulated to the vehicles emissions (ie. No emissions, only a single instance of full taxes, and progress from there to double the taxes as level of car emissions increase). There is ample research available on the efficiency of such feebate scheme
·         Additional taxes on private car ownership, again modulated on emissions
Where there is a will, there is a way. Now, it is the core issue, isn’t it? What exactly is the will?

JC Clement
Jordan, Hong Kong

Sent to: (Carrie Lam),, (Paul Zimmerman) (Mike Rowse) on June 25th, 2017

Updated 2017-DEC-21: 

Now that a few months have past, we can check if the government’s assumption that reducing the EV incentives would reduce the car purchases, we can clearly see that it has not been the case at all:

If we extrapolate November and December 2017 with the monthly average of 2017, we can see that 2017 is going to be just over 38,000 new private cars. More than 2016. This confirms that the policy or discontinuing the EV first registration rebate has been a complete failure and will have resulted in more street-level pollution.

Basically, I took the government numbers and compared the same period in 2016, then after the end of the rebate in 2017, for the most popular car brands. It is quite clear that what happened is that Tesla candidate buyers just shifted and bought a BMW instead. Again, proving the total policy failure.

f the government really wants to do something about abating the unchecked growth of private cars. Taxes them to death. And re-introduce the EV registration discounts so that new vehicles are cleaner.