Great Potential: Electric Vehicles in Hong Kong
Posted on 14 April 2024 by jour2126 group
1.Introduction
Electric vehicles (EVs) are vehicles with electric motors powered by electricity rather than using conventional gasoline or diesel as fuel. As technology advances and prices fall, the performance and usability of electric vehicles continue to improve, attracting consumers for environmental friendliness and low maintenance costs.
Chart 1.1. First registration and total registration of electric cars, 2022.9-2024.1. Source: Hong Kong Transport Department
In Hong Kong, the portion of newly registered electric vehicles among private cars hit a new high, increasing from 6.4% to 64.1% in the past five years, according to the Hong Kong Transport Department. As of Jan 2024, the total number of electric cars is 79,580, representing about 8.6% of the total vehicles.
Chart 1.2. Two in every three newly registered vehicles in Hong Kong are electric vehicles, 2023. Source: Hong Kong Transport Department.
The increase is largely driven by government support and promotion, as the Hong Kong government actively supported the construction of charging infrastructure and offered tax concessions for electric vehicles. According to the Environmental Protection Department, the wider or eventual full adoption of EVs will be a key element that drives Hong Kong towards the vision of “Zero Carbon Emissions • Clean Air • Smart City”.
This article analyses the current market of Hong Kong electric vehicles, approaching the issue from Hongkongers' preference, the relative financial advantage of electric cars, public charging infrastructure, and market demand compared to other regions in the world. It is argued that, though faced with challenges in charging infrastructure, the Hong Kong electric vehicle market holds great potential and dynamism.
2. Hong Kong People's Preference and the Reasons Behind it
According to the Hong Kong Electric Vehicle Database, the number of newly registered electric private cars in Hong Kong in 2023 was 28,542. Tesla dominated the market with 9,639 vehicles, well ahead of BMW, BYD and Mercedes-Benz and capturing 33.8% of the market share. In other words, for every three electric cars sold in Hong Kong, one of them is a Tesla.
Chart 2.1. Electric private cars' new registration by brands in 2023 in Hong Kong. Source: Hong Kong Electric Vehicle Database & Electric private cars' new registration by models in 2023 in Hong Kong （partial showcase). Source: Hong Kong Electric Vehicle Database
Among these brands, the three most purchased models by Hong Kong people in 2023 are, in descending order, the Tesla Model Y RWD, BYD ATTO 3 and Mercedes-Benz EQB250 (X243).
The top three factors that Chinese consumers mainly consider when purchasing new energy vehicles are maximum range, time required for charging, and vehicle safety, followed by price, energy-saving, and appearance, according to research by iiMedia.
Chart 2.2 Price and performance comparison of hot-selling models in Hong Kong. Source: Hong Kong Electric Vehicle Database. & Safety rating of three hot-selling models in Hong Kong. Source: EURO NCAP safety ratings.
According to the Electric Vehicle Database, the Tesla's battery capacity is lower than BYD's, but its maximum range under the Worldwide Harmonized Light Vehicle Test Procedure (WLTP) standard is 455 km, far exceeding BYD's 420 km, and it boasts a much faster charging rate.
Tesla's success in Hong Kong is also due to its company's strategy and the Hong Kong government's support for the development of new energy vehicles. Tesla established its office in Tsuen Wan, Hong Kong, as early as 2010 and opened a service center of approximately 280 square meters in 2011, considering Hong Kong as an important target market.
Tesla outperforms the other two models in terms of protection for adult occupants and vulnerable road users, as well as safety assistance, according to the latest EURO NCAP safety ratings. However, the Mercedes-Benz EQB250 (X243) did best in protecting child occupants.
The Mercedes Benz is the most expensive of the three hot-selling models under the One-for-One scheme, with a larger battery capacity and longer range, according to the Electric Vehicle Database.
The "One-for-One '' Scheme” aims to allure car owners to prioritize electric vehicles when considering replacing their cars,initially set to expire on March 31, 2024. It is proposed for extension until March 2026, according to the 2024-25 budget address by Financial Secretary Paul Chan Mo-po.
However, the maximum first registration tax exemption for 2024 has been reduced by 40%, from HK$287,500 to HK$172,500.
Mainland China's leading electric vehicle brand with the cheapest price of the three, BYD, has entered the Hong Kong car market for about two years, outselling BMW and is second only to Tesla in 2024, according to the Hong Kong Electric Vehicle Database.
Compared to the lithium iron phosphate batteries used by Tesla, BYD's blade batteries offer better safety. The first-generation Blade batteries were pinned, squeezed, bent, or heated to 300°C in a furnace and overcharged up to 260 percent without fire or explosion, according to a report by Euromarque.
3.Cost Comparison of Electric Vehicles and Fuel Vehicles
3.1. First registration tax
The Hong Kong Government's acquisition tax requirements are set out below:
| Class of Motor Vehicle | Rate of Tax | |
|---|---|---|
| I. Private cars |
(a) on the first $150,000 | 46% |
| (b) on the next $150,000 | 86% | |
| (c) on the next $200,000 | 115% | |
| (d) on the remainder | 132% | |
| II. Motor cycles and motor tricycles |
35% | |
Chart 3.1. Hong Kong's first registration tax by different modes of vehicles. Source: Hong Kong Transportation Department.
At the purchase tax level for both types of vehicles, the Hong Kong government seems to offer better purchase tax concessions to battery cars. The Government announced on Feb. 28 that the first registration tax (FRT) concession arrangement for electric vehicles will be extended for another two years until Mar. 31, 2026. The relevant new FRT concession arrangements for various types of electric vehicles are as follows:
The maximum FRT concession for electric private cars (e-PCs), granted under the "One-for-One Replacement" Scheme, will be adjusted to HK$172,500, whereas the concession ceiling for general e-PCs will be lowered to HK$58,500.
3.2. Travel Cost
According to the Consumer Council, the Standard Petrol Price Trend (after walk-in discounts less duty)(13 Apr 2023 - 12 Apr 2024) steadily increases.
Chart 3.2. Standard Petrol Price Trend(after walk-in discounts less duty)( 13 Apr 2023 - 12 Apr 2024). Source: Consumer Council.
The EVs can drive more than 130 kilometers after charging, and some models can even travel more than 400 kilometers. For example, a medium-speed electric vehicle can travel about 40 kilometers on an hourly charge. In terms of cost, charging costs are almost 7.6 times lower than gasoline fuel, according to Money Hero.
3.3. Maintenance costs
According to the Office of Scientific and Technical Information, the estimated scheduled maintenance cost for a light-duty battery-electric vehicle (BEV) totals 6.1 cents per mile, while a conventional internal combustion engine vehicle (ICEV) totals 10.1 cents per mile. A BEV lacks an ICEV’s engine oil, timing belt, oxygen sensor, spark plugs and more, as well as the maintenance costs associated with them. The hybrid-electric vehicle (HEV) and the plug-in hybrid-electric vehicle (PHEV) share costs with both the ICEV and the EV but save money on brake maintenance.
Chart 3.3. Per-mile maintenance costs by powertrain. Source: Office of Scientific and Technical Information
3.4. Repair costs
Electric vehicles are also relatively less expensive to maintain than gasoline vehicles. The maintenance cost scaling factor by powertrain and body size estimated by the Office of Scientific and Technical Information shows that the repair cost of BEV is relatively lower than ICEV in all models.
Chart 3.4. Repair costs by powertrain. Source: Office of Scientific and Technical Information.
4. Charging Infrastructure
The growth in the number of public chargers for electric vehicles in Hong Kong is obviously insufficient.
According to statistics from the Hong Kong Transport Department, the number of private electric vehicles in Hong Kong has increased sharply from 4,070,000 electric vehicles in 2015 to 74,896 in 2023. The number of public charging piles in Hong Kong is also increasing, with the number of charging piles increasing from 1,221 in 2015 to 7,415 in 2023, which is seven times the original number. However, the number of public chargers has decreased relatively, from 30% in 2015 to 10% in 2023. Members of the public pointed out that the relative lack of charging facilities hinders the popularization of trams in Hong Kong, questioning whether the government has made corresponding preparations for the popularization of trams.
On the other hand, Hong Kong also lacks high-end charging piles. As of December 2023, about one-third of charging stations are low-level charging stations, which use household chargers and can take up to two days to charge an entire vehicle. It is much slower than medium-speed (average 4 hours to fully charge) and fast (average 1 hour to fully charge) charging stations. Fast charging stations only account for one-seventh of the total number of charging piles.
In order to deal with this problem, the government proposed increasing the number of public chargers to 5,000 or more by 2025 as one of the main policy goals in the "Roadmap for the Popularization of Electric Vehicles" announced in March 2021. In addition, the government also plans to install more medium-speed and fast chargers to shorten charging time.
Chart 4.1. Hong Kong public charging pile quantity by charging speed & ratio to electric vehicles, 2015-2023. Source: Hong Kong Environmental Protection Department
5. World View
Hong Kong has stronger market demand for electric vehicles compared with other countries.
Hong Kong is one of the fastest-growing places in the world to adopt electric vehicles, partly due to its unique geographical location. Hong Kong is located in a subtropical region, with higher temperatures in winter and fewer low-temperature days. This means that the batteries of electric vehicles will not be damaged by low temperatures, and the cruising range will last longer in winter. Another reason is Hong Kong's superior market environment for electric vehicles. As analyzed above, the Hong Kong government wants to encourage people to buy more cars to reduce the environmental pollution of gasoline by implementing a series of preferential policies for electric vehicles. Therefore, Hong Kong has preferential tax incentives for the registration of electric vehicles, and the cost of using the vehicle is much lower than that of gasoline vehicles at the same price level. At the same time, complete infrastructure, such as charging piles, also makes the daily use of electric vehicles very convenient.
These allowed Hong Kong’s electric vehicle market to develop rapidly in recent years. From 2017 to 2023, the number of licensed electric vehicles in Hong Kong has increased by nearly 70,000, and the proportion of electric vehicles to all vehicles sold went from less than 1% to over 72%. Since 2018, the annual selling scale of electric vehicles in Hong Kong has been above the global average, and the growth rate has far exceeded other typical regions in the world (taking Europe and California in the United States as examples, see Table 6.1)
Table 5.1. Percentage of EV in new car sales in certain regions, 2017-2023. Source: CleanTechnica; California New Car Dealers Association.
Taking 2022 as an example, according to the Hong Kong Census and Statistics Department, among the 37,478 newly registered vehicles in Hong Kong, the number of electric vehicles is 19,795, accounting for about 52.8% of all registered vehicles. Compared with other places in the world, although the number of electric cars sold in Hong Kong is slightly insufficient due to population reasons, the proportion of all cars sold in Hong Kong is several times that of many places in the world. (See Table 6.2) This shows that Hong Kong residents have a strong desire to buy electric vehicles, and so the market advantages are obvious.
Table 5.2. Percentage of EV and annual sales in different countries/regions in 2022. Source: Hong Kong Census and Statistics Department; Statista.
6. Conclusion
Electric vehicles are rapidly emerging in Hong Kong and becoming an important part of the future of sustainable transportation, providing the city with a greener, more ecologically friendly, and more affordable alternative to conventional gasoline or diesel-fueled vehicles. Driven by tax incentives from the government plus low usage and maintenance costs, Hong Kong's market has seen robust growth, with two in every three newly registered vehicles in 2023 being electric-powered, a profound number compared to the rest of the world. Although faced with challenges in terms of lacking public charging infrastructure, the development prospects of Hong Kong's EV are still promising as the government continues to offer tax concessions and promote sustainable development.
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