The business press has given a lot of attention lately to Elon Musk’s plans for the future financing of Tesla, however without really looking at the one factor that is critical for the bottom line, as for any car company: the trend in cars sold. And if the Hong Kong market, which boasted the highest number of Tesla cars per capita in 2016 is anything to go by, the trend is not good.
Regular readers of this blog may remember my video post from a business trip in Hong Kong in March 2017, that you can otherwise view here. Little did I know at the time that a month after that video was made, things would take a dramatic turn for the worse in terms of Tesla sales. In the record month of March 2017, almost 3000 Teslas were registered in Hong Kong, before the bottom went out of the market in April with only 32 (!) cars being registered in the territory for the remainder of 2017, and with numbers continuing to drop so far in 2018.
What Hong Kong residents knew back in March of last year, and I didn’t, was that the HK government was about to abolish the heavy subsidy on Teslas to the benefit of more ordinary, electric cars. Hong Kong is not the first market where removal of subsidies has had a dramatic effect on Tesla sales, Denmark is another. To make things worse, Hong Kong residents conscious of the environment should probably be happy about the drop, as research from Bernstein from 2016 has shown that electricity generation in Hong Kong is so dirty that a Tesla will throughout its lifetime be responsible for 1/5 more CO2 emissions than an equivalent petrol car.
The removal of the tax subsidy made Teslas massively more expensive in the local market, but not more so than a BMW, MB or Audi, all of which continue to sell significantly more cars than Tesla. As everyone who has driven a Tesla knows, it’s a fascinating car, but if you remove the engine, it is no match for the traditional luxury brands. This is what the statistics from Hong Kong prove, and it thus seems clear that the most critical factor for Elon Musk’s financing plans and Tesla’s future is government subsidies – or in other words, politics.