Government Policies Nurture EV Growth in Norway

If evidence was needed to show that consistent government support for sales of electric vehicles can create a sustainable market, look no further than Norway, the world’s No.1 country for sales of EVs in 2016.

With a 29% share of the global market for new EVs, the Scandinavian country is a leading light in the transition to zero-emissions cars, the Norwegian Electric Vehicles Assn. notes. According to the International Energy Agency’s Global EV Outlook 2017, of 750,000 EV sales worldwide during 2016, Norway’s sales were about 217,000.

And while national governments of different political stripes have been gradually supporting the adoption of EVs since the early 1990s, sales have accelerated in the past seven years, with the increasing availability of “more usable electric vehicles in terms of size, comfort and range,” says Benjamin Strandquist, communications advisor for the Norwegian Automobile Importers’ Assn.

This new range of affordable e-cars (Norway’s average gross national income per capita was $82,440 in 2016, so many consumers are well-off) combined with government incentives introduced in the 1990s to promote the Norwegian-built Think City battery-electric car. It was made in Oslo by automaker Think Global until 2012.

Initially, Norway’s government in 1990 exempted the purchase and import of electric cars from duties. The government followed up by lowering the annual road tax in 1996 for EVs, and by waiving fees on toll roads in 1997 and state ferries in 2009. In 2000, corporate taxes for companies giving their employees an EV were reduced and in 2005, EV drivers were allowed to use bus lanes. EV owners also are exempt from a congestion charge in Oslo, which can reach NOK59 ($7.50) during rush hours.

All of this has helped, but it was the 2001 exemption from the standard 25% value-added tax rate paid on EV purchases, representing about NOK100,000 ($12,700) of the price of many models, that has helped electric cars compete on price with gasoline- and diesel-powered cars in Norway.

The government also removed the 25% VAT charged on leasing EVs in 2015, expanding the potential market. Taken together, all these benefits are “the foundation of the Norwegian EV success story,” says Petter Haugneland, communications manager of the Norwegian Electric Vehicle Assn.

Referring to Think Global’s demise, Haugneland says: “The Norwegian electric vehicle adventure didn’t last, but the incentives did. The reasoning behind the tax benefits have gradually shifted towards reducing emissions, and today most (political) parties support the package of sticks and carrots that has taken us where we are today.

 “You don’t need to be an environmentalist to buy an electric vehicle,” he adds. “It makes economic sense for many consumers.”

Norway’s electricity grid and energy market also have played a key role in boosting EV sales. “Norway historically has had some of the most expensive gasoline prices in the world at approximately $7 per gallon, significantly increasing the cost of ownership of an internal-combustion-engine car versus an electric vehicle,” says Jake Styacich, a strategic communications and policy associate at the U.S.-based Electric Drive Transportation Assn.

Norway also produces clean electricity, increasing environmentally focused consumers’ incentive to buy EVs: “With a majority of its electricity generated from hydroelectric power, Norway has one of the world’s cleanest grids and consequently, best well-to-wheels emissions rating for owning an electric vehicle,” Styacich says.

Looking ahead, if e-car sales continue to boom in Norway, its government may need to reconsider its policy – lest it lose too much revenue.

The current center-right coalition government plans to revise the existing incentive program as sales accelerate. The existing tax breaks will remain unchanged in 2018 but probably will be reassessed next year. Moreover, drivers in the future probably no longer will benefit from full toll exemptions, instead paying an admittedly still low price that will be calculated on carbon dioxide and nitrogen oxide emissions.

But there is no reason to expect wholesale abolition of these incentives, Styacich says, noting the government has signaled it wants to achieve a goal of ensuring all new passenger vehicles sold in Norway are zero- or low-emissions by 2025. This will have to be achieved by encouraging buyers with incentives and not by banning internal-combustion engines, he says, contrasting Norway’s approach with the French government’s plans to end sales of gasoline and diesel vehicles by 2040.

Meanwhile, more charging infrastructure will be introduced, including fast-charging stations in Norway’s extensive rural areas.