Hong Kong has long been one of Tesla’s biggest markets, but it may not be for much longer—not a single newly purchased Tesla model was registered in April, according to data from Hong Kong’s transport department.
The plunge in interest in Tesla cars came after the government eliminated tax breaks for electric-vehicle (EV) owners, a policy that went into effect on April 1 and is expected to last until March next year. Now, the city has capped the tax waiver at HK$97,500 ($12,500) on private EVs, and is only applicable to first-time owners. There were 2,939 first-time Tesla registrations in March just before the new tax rules kicked in, around five times that of the number in February.
As a result, it now costs HK$925, 500 ($118,400) for a Tesla Model S 60, compared to HK$570,000 ($72,900) before the new tax policy—giving it little or no price advantage over a Mercedes-Benz.
First-time registrations don’t exactly equal to sales, but is nevertheless a useful proxy as the car needs to be registered in order to run on the road in Hong Kong, said (paywall) the Wall Street Journal, which first reported the story. Hong Kong had 11,004 EVs in use as of May this year, including privately owned and public transport vehicles, according to Hong Kong’s Environmental Protection Department.
A Tesla spokesperson wrote to Quartz that the company’s business did not “rely on” government policies and the company believed that Hong Kong market would continue to be “very strong”:
Hong Kong remains a significant market for Tesla and we continue to sell cars there each quarter. When the Hong Kong Government reduced the tax exemption for electric vehicles and increased the cost of our cars by nearly 100%, it’s to be expected that demand will be impacted in the period immediately following the change, particularly because of the large number who bought just prior to the change being implemented.
In 2015, new registrations for EVs in Hong Kong grew almost three times from 2014, Tesla said. Its Model S vehicles made up 70% of the city’s nearly 4,200 EVs in 2015. Tesla CEO Elon Musk said that the city’s tax waiver for EVs was “excellent.”
As interest in Tesla starts to wane in Hong Kong, the company has set its sights firmly on mainland China, where it plans to establish a manufacturing facility which would allow Tesla to dodge import taxes that are as high as 50% of the vehicle’s price. In 2016, China registered as many as 352,000 new EVs, compared to America’s 159,000 in the same period, a number that is set to increase as the government continues its fight against air pollution.
The piece has been updated with response from Tesla on July 10.