Tesla’s sales stalled in Hong Kong once a vehicle registration tax waiver ended Mar. 31, hurting a market Elon Musk once called a “beacon city” for the electric automaker’s China sales.

There were zero new Model S and Model X units registered in April, following March when 2,939 Tesla vehicles had been registered in Hong Kong. There were just five privately owned Tesla vehicles registered during May in the city.

A new policy started April 1 in Hong Kong that significantly reduced the tax exemption for electric vehicles and it is to last until March 2018. The policy change nearly doubled the price of a new Tesla vehicle, the company said.

According to a Wall Street Journal report, disappearance of the tax benefit meant that the purchase price of a Tesla Model S went from HK$570,000 in Hong Kong dollars ($72,900 in U.S. dollars) up to HK$925,000 ($118,400) for a Tesla Model S in Hong Kong.

A Tesla representative interviewed by Business Insider acknowledged that loss of the Hong Kong incentive is affecting the company.

“Hong Kong remains a significant market for Tesla, and we continue to sell cars there each quarter,” the Tesla spokesperson said.  “When the Hong Kong government reduced the tax exemption for electric vehicles and increased the cost of our cars by nearly 100%, it’s to be expected that demand will be impacted in the period immediately following the change, particularly because of the large number who bought just prior to the change being implemented.”

Tesla’s representative said the company will continue to see demand in Hong Kong regardless of the tax benefits being taken away.

“Tesla absolutely believes that the Hong Kong market will continue to be very strong over the long term because it’s clear that the people in Hong Kong love our cars,” the Tesla representative said.

Tesla vehicles have cost consumers about 50-percent more in China than in the U.S. due to tariffs and shipping costs.

The company has been in negotiations with the government to build a factory in China to remove these barriers. That may require Tesla to create a joint venture with a Chinese government-backed company, which has been the case with all other foreign automakers manufacturing vehicles in China.

SEE ALSO: Tesla’s Musk Calls Hong Kong a ‘Beacon City’ for EVs and Superchargers

Tesla vehicles have been playing a prominent role in the city, being the leading EV brand. Tesla’s Superchargers have also been visible in the city.

The end of the Hong Kong tax break was announced in February. There were about 3,700 registrations of Tesla vehicles in the first quarter of this year, with 2,939 taking place in March just prior to the incentive being halted.

Business Insider