Hong Kong quadruple electric car sales in 2 years, thanks to Tesla
To say that Tesla electric cars are ubiquitous on Hong Kong’s busy roads is no exaggeration.
Of the 4,899 electric-vehicle plates registered here as of April, over 80% are associated with the California-based company, according to Bloomberg Intelligence. The number has more than quadrupled from just 1,160 two years ago, when the company started delivering its Model S luxury sedans in the city.
Such meteoric growth has prompted Tesla Motors founder Elon Musk to dub Hong Kong the “beacon city” for popularizing sustainable means of private transportation.
“Hong Kong meets a lot of the criteria,” said Steve Man, Bloomberg Intelligence’s director of research in Asia for autos and industrials. Man was referring to elements conducive to the adoption of electric cars, where competitive ownership costs and so-called range anxiety come to the fore.
“Consumers actually pay two times more than the retail prices” for a fuel-powered vehicle in Hong Kong, given the city’s punitive environmental taxes, Man said. This makes a Tesla 90D, for instance, cheaper than a Mercedes E400 here despite its higher retail price.
Tesla’s financing program and residual value buyback program further cut the total costs of owning the vehicle, excluding maintenance, to half of its price tag.
More specifically, after the 10% down payment the monthly installment is calculated at 45% of the vehicle’s value. And three years from the purchase, the company will buy back the car for 65% of its retail price. Meanwhile, operating costs are much lower than for a gasoline vehicle, given the annual gas costs could be as high as six times the charging costs in Hong Kong.
As for range anxiety, the city’s small size makes driving distances generally short.
Easily accessible chargers further ease such concerns. With 54 superchargers, which allow charging in minutes instead of hours, and 120-plus destination chargers at convenient locations, Tesla drivers can reach a charging facility within 20 minutes. Hong Kong is said to have the highest density of Tesla charging stations in the world, with one outlet per three vehicles on average, versus seven in mainland China and the U.S.
This explains why the city alone made up about 10% of Tesla’s overseas sales last year, while mainland China as a whole accounted for up to 12%.
Musk stated early this year that Tesla seeks a local partner in China in order to better penetrate a market where local governments give domestic players preferential treatment in the form of subsidies.
Tesla told the Nikkei Asian Review that it has not signed any memorandum of understanding with companies in China so far. But the market is speculating that it will spend $4.5 billion to $5 billion on building a manufacturing facility in Shanghai.
Bloomberg Intelligence’s Man suggested the sum is large enough to cover production, growing an enormous dealership network in China, building many superchargers, or even establishing a research and development center.
“If they can spend that much money in China, there is a chance that the Chinese government may extend those subsidies to Tesla,” Man suggested, adding that the multiplier effect from the investment will certainly boost Tesla’s negotiating power with Chinese regulators.
“If you don’t invest in China, you’re not going to get leeway,” Man said.