With many countries like the UK and France banning the sales of vehicles with internal combustion engines to encourage the uptake of electric vehicles, Norway’s solely incentive-based approach levelled the playing field with impressive results
Norway offers evidence that electric vehicles (EV) for personal transport can become mainstream if the cars are cheap enough. Globally, EV adoption is expected to start accelerating in the medium-term, once the purchase price without subsidies, is the same as vehicles with internal combustion engines (ICE). Price parity is expected mid-decade, in large part because of declining battery costs. Adoption will also increase as the mileage range for EVs on a single charge increases and charging infrastructure becomes more widespread.
Norway has by far the world’s largest proportion of electric passenger vehicles, a market buoyed by the most generous subsidies for EVs anywhere. By the first half of 2020, EVs made up almost 50% of new passenger car purchases in Norway, says Petter Haugneland from the Norwegian EV Association. Of the 2.7 million passenger cars on Norway’s roads, about 290,000, more than 10%, are fully electric, he adds. Since 2001, EVs in Norway have been exempt from the nation’s 25% sales tax and since 1990 from import taxes based on CO2 and nitrogen oxide emissions and weight.
EV owners also receive several benefits over conventional road users. They are exempt from road tax. Until 2017–18 they also avoided toll road or ferry charges and in 2020 still only pay half of the full price of these charges. The same benefits are offered for municipal parking fees. EV owners can also access a break on company car tax and are offered compensation when trading in a carbon emitting vehicle for an electric alternative.
In 2017, the Norwegian government launched a programme to finance at least two multi-standard fast charging stations every 50 kilometres on all main roads, which has been widely successful except in some remote areas, says the EV association. A new programme will establish fast chargers in the remote north of the country by 2021. Some local authorities, such as in the capital Oslo, also subsidise the installation of charging points in multi-family dwellings.
According to the EV association, the price of €22,046 for a conventional VW Golf increases to €34,076 in Norway once tax is applied. The cost of VW’s e-Golf, however, increases from €33,037 to just €33,286 after tax — cheaper than its ICE counterpart.
DIFFICULT TO REPLICATE
Rystad Energy, a Norwegian energy consultancy, says Norway effectively subsidises EVs by $20,000 per car for five years’ usage, excluding infrastructure subsidies. According to the EV association, on average a battery plug-in vehicle will avoid two tonnes of CO2 emissions a year in Norway, the equivalent of the government spending some €1750 for every tonne of avoided CO2.
In the size of its EV subsidies, Norway is an outlier. Three major EU countries have recently advanced their pro-EV policies, notes Saul Lopez, e-mobility manager with Transport & Environment, a campaigning think tank, but they fall well-short of Norway’s incentives. Germany has approximately doubled its EV subsidies to €9,000 per EV while lowering value added tax on the vehicles from 19% to 16%.
France has reiterated its goal to manufacture more than a million EVs yearly over the five years from 2020 and is giving a subsidy of €7,000 per EV. Unlike Germany, France also includes latest-generation ICE vehicles in its stimulus plan. And Spain in 2020 is offering a subsidy of €5,500 per EV.
By 2025, the Norwegian government wants 100% of new cars sold to be electric. Rystad predicts that Norway will fall somewhat short, reaching 85% sales with some people in suburban and rural areas still choosing plug-in hybrids or gasoline/diesel vehicles. The government’s goal is not binding, notes Rystad’s Artyom Tchen.
Most governments could not afford the same amount of financial support for EVs as Norway, says Lopez, limiting the potential of replicating the success. Many countries do not charge so broadly for use of roads, tunnels and bridges as Norway, for example, says Tchen. Norway’s taxes on purchases and imported vehicles are unusually high as well. Other countries, however, could take inspiration from incentives such as removing tolls, parking fees, and registration tax for EVs.
While most countries cannot invest as heavily in EVs as Norway, it indicates that the market will shift given a more level playing field.
A key take-away from Norway’s experience, says Tchen, is that a high EV penetration can be achieved without a ban on ICE vehicles. Norway has succeeded in becoming an “EV paradise,” says Lopez. “It’s had a very aggressive approach financially and even if you don’t care about the environment, you care about your money.”
TEXT ROS DAVIDSON
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