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Following is a question by the Hon Frederick Fung and a written reply by the Secretary for the Environment, Transport and Works, Dr Sarah Liao, at the Legislative Council meeting today (October 25):
Question:
In his recently delivered policy address, the Chief Executive proposed a 30% reduction in first registration tax (subject to a ceiling of $50,000) for newly registered vehicles with low emissions and high fuel efficiency. It has been reported that some models of electric-petroleum hybrid saloon cars ("hybrid saloons") will be eligible for this tax concession measure. In this connection, will the Government inform this Council:
(a) of the details of the measure and its implementation timetable, including how "low emissions and high fuel efficiency" is defined, the types and models of vehicles which are eligible, and the measures to ensure that the benefit to vehicle buyers from this tax concession measure will not be offset by a corresponding increase in vehicle prices by vehicle sellers;
(b) whether it has assessed the impact of the tax concession measure on the competitiveness of hybrid saloons; if so, of the assessment results, including the results of a comparison in prices with traditional vehicles, and the estimated number of vehicle owners who will be attracted to switch to hybrid cars by the tax concession measure;
(c) whether it has assessed the latest supply situation of hybrid saloons and their cost effectiveness; if so, of the assessment results; whether it will consider introducing other concessionary measures (for example, remission of the annual licence fees) to encourage members of the public to switch to these types of saloons; and
(d) whether it will consider setting the respective target percentages of hybrid saloons in the saloons to be used by the Government and the community in the next few years; if so, of the targets; if not, the reasons for that?
Reply:
Madam President,
(a) The Government plans to encourage the purchase of environment friendly private cars through a 30% reduction in the first registration tax (FRT) starting from 1 April 2007, subject to a ceiling of $50,000 per vehicle. The proposed tax concession is applicable to private cars that meet both of the following two conditions:
(1) the hydrocarbons (HC) and nitrogen oxides (NOx) emissions of the cars do not exceed 50% of the following standards:
(i) the Euro IV emission standards; or
(ii) the Japan 2005 emission standards; and
(2) the fuel efficiency (measured by the mileage travelled with a litre of fuel) of the cars should be at least 40% better than the average fuel efficiency of vehicles of the same class by weight.
We will review annually the above standards in the light of technological advancement so that the tax concession will be restricted to vehicles of outstanding emission and fuel efficiency performance. We are now consulting relevant trades on the above scheme. We will publish the private car models meeting the qualifying criteria before the tax concession comes into effect.
Market competition provides the best guarantee for consumers to benefit from the tax concession. Based on the information at hand, we estimate that over ten private car models in the market could meet the criteria. The scheme will also encourage the introduction of more environment friendly private cars into the local market, thus further increasing the supply and market competition.
(b) Although petrol-electric hybrid private cars (hybrid private cars) are generally more expensive than their petrol counterparts, the 30% reduction in FRT by the Government, together with fuel savings, should be sufficient to make them more attractive. That said, price is only one of the considerations for car owners in purchasing cars. Other factors such as car model and equipment may also have a bearing on their choices. Therefore, it is difficult for us to predict the ultimate number of vehicle owners who will be attracted to switch to hybrid private cars by the tax concession measure.
(c) At present, five models of hybrid saloons are available in the local market. In April 2005, the Government commenced trials of one of the models and the findings reveal that the fuel consumption of the hybrid saloon is about 50% lower than that of an ordinary saloon with the same power output. Calculation based on the average mileage of a private car (about 12,500 km per year) shows that about $11,200 can be saved on fuel per annum. The findings also indicate that the maintenance cost of that hybrid model is about the same as an ordinary saloon.
A reduction in the FRT should provide sufficient incentive already and we have no plans at present to launch other concession measures.
(d) As mentioned in (b), price is only one of the considerations to car owners in purchasing cars. Therefore, it is difficult for us to set a target percentage of hybrid private cars among all the saloons in Hong Kong. However, the Government will set an example by giving priority to environment friendly private cars as and when saloons in the Government fleet are due for replacement, subject to operational requirements and the rational utilisation of resources.
Ends/Wednesday, October 25, 2006
Issued at HKT 12:40
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