Why Is Hong Kong Ending EV Tax Breaks? Does It Make Sense?

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Hong Kong has a sizable tax break available for electric vehicle purchases, comparable to what the US had before Donald Trump took office and Republicans took control of the US Congress on the low end. It is HK$58,500 (US$7,477), or a whopping HK$172,500 (US$22,047) if you trade in/scrap on old car.

However, Hong Kong has decided to end this tax break, and March 31, 2026, is the last day you can qualify for it. But why? Is the Hong Kong government Trump-like, wanting to stop all kinds of cleantech progress?

Nope. It’s just that the Hong Kong EV market is so advanced that this subsidy is no longer seen as needed. Hong Kong Financial Secretary Paul Chan Mo-po defended the change in policy by noting that 70% of new vehicle sales in Hong Kong are now EVs, and 16% of all registered vehicles there are. The market should take it from here — that’s the idea, anyway. Perhaps it helps that Chinese EVs have become so competitive in every way now.

Though, there may be no vehicle sales in the second half of the year, as the craze to buy EVs now is apparently absurd. One car dealer told the South China Morning Post that EV sales had skyrocketed 17 times over following the decision being made at a Legislative Council meeting. Long lines have formed at dealers, and another dealer told SCMP that a man who could not get in before midnight was crying thinking that he had missed his opportunity, only for the dealer to happily explain that he still had until March 31 to buy an in-stock vehicle. Phew.

The government of Hong Long still intends to phase out fossil-fueled vehicles by 2035.

The issue critics of the change have is that keeping the tax breaks in place could lead to a fossil fueled vehicle phaseout quicker, and I don’t see how that could be denied. Keep the tax subsidies and phase out fossil fueled vehicles faster. Why decide that 2035 is fine and to soften longstanding policies when you could just phase out polluting vehicles quicker? “One listener on the program, a taxi driver surnamed Lee, expressed strong dissatisfaction with the abrupt cancellation, stating that it greatly reduces the incentive for drivers like him to switch to electric vehicles,” The Standard reports. Indeed, I don’t get it. Given the urgency of the climate crisis, if you are leading on cleantech adoption, why not keep leading? Why slow down?

Still, kudos to Hong Kong for being a clear leader in the sector. It doesn’t get much attention, since it’s a relatively small place and so far away from US and European markets. But a 70% EV adoption rate is right up there near the top of the list globally, only trailing Norway as far as I know. And Hong Kong actually has more residents than Norway! The population of Norway about 5.7 million, while the population of Hong Kong is about 7.4 million people.

Anyway, will EV adoption slow down in Hong Kong? Or is the market so mature that this will hardly register as a blip? We will see.

Image by Steven Yu from Pixabay