Hong Kong is part of China. Technically.
We are a "Special Administrative Region," after our handover from the British colonialists to the Chinese communists. That happened in 1997. Macau -- now the world's largest gambling market by a long stretch over Las Vegas -- made a similar transition from the Portuguese in 1999.
Tesla (TSLA) must be wishing that the rest of China was just like our SAR. It is already making a lot of money here -- and so, perhaps, can you.
The SAR designation is a nice bit of bureaucrat-ese. But it means we have our own immigration rules, our own laws, our own currency, our own police force. The People's Liberation Army can't supress us. They're present in the bases that they took over from the British, and if you go past, you'll see a sentry or two. But the soldiers are not allowed out into the streets.
I'm not sure what Elon Musk thinks about the Chinese government. He's clearly willing to do business with it. China determines who can do business within its borders, and they have allowed him in.
Two years ago, I wrote a story in a local magazine questioning why there were basically no electric cars on the streets here. The government bought a few for good public relations, but their bigwigs still drove gasoline guzzlers to the office. The police also bought a few, and in fact they discovered that electric motorcycles are very high-performance. About half their fleet of bikes are now electric.
This densely packed city of 7 million people is perfect for electric cars, because the furthest trip you can take is to the aiport, 30 miles away. Most of us live and work in high rises, where there are already free charging stations.
But aside from a few thought leaders such as Daryl Ng, the grandson of the founder of the developer Sino Land, and his Renault Fluence, there were few early adopters. He has had the idea of harnessing the wastewater falling out of the skycrapers in Hong Kong (which has the most skyscrapers in the world) to drive turbines and generate power, which I wrote about for The New York Times.
He ordered an electric BMW as soon as one was available here -- there was a waiting list. We photographed him when the first of the vehicles arrived, and as he awaited his own. He thought just about every feature of the car was "cool" and enthused about it all. As one of the people at the photo shoot observerd, "Daryl is a BMW fanboy first, and an evangelist for EVs second."
That is why Tesla works here.
There are more Rolls Royces per capita in Hong Kong than anywhere else in the world. Sedans from Mercedes and BMW, now pushing its 7 series here, are the common mode of transport for anyone with a moderate amount of money. Because Hong Kong's streets are narrow, tycoons travel in seven-seater Toyota Alphards.
Many people change to a new car every three years or so. The government charges a hefty tax on new car purchases, but has waived it on electric cars. There were fewer than 100 electric cars on the Hong Kong streets in 2010. Now there are 4,464, according to government data, which also lists the brands available.
Around one-quarter of all new sedans sold in Hong Kong, electric or not, are the Tesla Model S. They just wanted a sedan cool enough to compare to their Merc or Beemer. Elon Musk actually bothered to come out here, and said Hong Kong will be "an example to the rest of the world on what to do." He said Hong Kong will be the leader in the world of electric cars. But he added that he gets a lot more support here than from Chinese authorities outside our little SAR.
I test-drove a Nissan Leaf when I wrote that story two years ago, and I thought it was pretty awesome. Acceleration, supposed to be a factor, was great. The car was almost silent, bar a whirring noise that sounded a bit like a plane taking off. The full-time driver showing me around told me that's a fake sound, you can actually turn it off. It just freaks people out to drive a silent car. All you can hear are the tires rolling.
Tesla misfired in China, where distances are much greater and cities more expansive. But Hong Kong is a "thought leader" in terms of fashion, finance and just about everything else in greater China. We may be getting fewer mainland visitors, but they still go home and report on what they found outside the great Chinese firewall.
At $250, Tesla's stock is approaching its all-time high of $280. Can it pull it off in China? China is littered with Western brands like Whirlpool (WHR), which entered it thinking they could sell a button to a billion Chinese and make a billion, only to discover they alread had buttons.
I foresee Telsa's stock driving higher. Tesla is the Apple (AAPL) of motor cars (Apple is a holding in the Action Alerts PLUS charity portfolio, which is co-managed by Jim Cramer). If it gets it right in China, the world's largest market, it can deploy that knowlege elsewhere. It has got it wrong so far, but it will roll out Tesla 2.0, 3.0, experiment until it gets it right. My colleagues at Forbes, where I am also a contributor, believe Tesla can get it right in China.
It's a common misperception that there is no innovation in China. That's not true. Even the companies that are the "Chinese e-Bay" (Taobao), "Chinese WhatsApp" (WeChat) and "Chinese Uber" (Didi Chuxing) have their own Chinese features.
China has its own version of Tesla. BYD is headquartered in Shenzhen, just across the border from Hong Kong in Guangdong province. It's a leader in battery design, one of the major flaws of electric cars so far, and works with the excellent universities here. It has introduced the all-eletric Denza, which contains a battery, but that is designed by Daimler. It looks a lot like a B-class Mercedes.
My wife, who is Chinese, does not trust anything from China. She says she wouldn't buy a car, or anything for that matter, from anyone making stuff there. We have vanity plates in Hong Kong, and one of my favorites is on a Porche Cayenne. It says "A FAKE." Of course, it is a real Cayenne.
I'm an ink-stained wretch. I can't afford a new Tesla right now. Jim Cramer doesn't pay me enough! I worked out that it would take about 20 years to make back the full cost of a new Tesla in terms of fuel savings.
But I've got my eye on Tesla's shares. And that BYD.