Sales of Tesla Inc. (NASDAQ:TSLA) electric vehicles will likely take a major hit in one of their most popular international markets soon because a major tax loophole in Hong Kong, that dramatically reduced the cost of Teslas and other electric cars in recent years, is being rescinded April 1st.
Written by StockNews.com
As Bloomberg reports, the tax break, which allowed consumers to save over $45,000 by buying a Tesla versus a similarly priced gas-powered car — likely spurred a massive and outsized number of Tesla sales in the relatively small market:
The loophole encouraged wealthy drivers to make Hong Kong one of Tesla’s top markets. The city accounted for about 6 percent of global sales of Model S sedans, according to Bloomberg Intelligence.
Tesla Chairman and Chief Executive Officer Elon Musk last year called Hong Kong a beacon for electric vehicles.
The rule exempted electric vehicles from a hefty tax on new private vehicle purchases. In extreme cases, that tax can reach up to 115% of the car’s value.
Hong Kong allowed electric cars a pass on the tax to try and reduce air pollution but, with so many drivers opting for electric vehicles as a result, the city-state is losing out on valuable tax revenue. Plus, regulators want to address the growing traffic problems in the highly congested area.
The price of a Tesla Model S sedan in Hong Kong starts at HK$570,500 ($73,400), according to Tesla’s website. When the tax exemption is nixed on April 1, that price will surge all the way to HK$926,000 ($119,170), according to one prominent Hong Kong-based Tesla owner.
Any way you slice it, the fallout of the tax change will likely mean a sharp downturn in Tesla and other EV sales in Hong Kong.
...Year-to-date, TSLA has gained 30.06%, versus a 5.71% rise in the benchmark S&P 500 index during the same period.
TSLA currently has a StockNews.com POWR Rating of A (Strong Buy), and is ranked #2 of 24 stocks in the Auto & Vehicle Manufacturers category.
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