Years ago, Norway decided it wanted to encourage the sales of electric cars and boy howdy, did it ever! It made them exempt from the sales taxes that buyers of conventional cars pay, and added in a bunch of other incentives ranging from rebates to free parking in cities, an exemption from paying tolls on highways, free passage on the nation’s extensive network of ferries, and a big push to get EV chargers installed everywhere.
The objective was to get to the point where EVs were the only new cars sold in Norway by 2025. According to the Norwegian Automobile Federation, based on the latest sales data from Norway’s Road Traffic Information Council, the last internal combustion engine vehicle is set to leave the dealership next April — 3 years ahead of schedule.
The trend has been clear for some time. In 2017, sales of gasoline and diesel cars were 50% of the market in Norway. So far this year, they are less than 10% (4.93% gasoline, 4.73% diesel). A year ago, they were at 25%.
We need to be clear here. The numbers for electric car sales include conventional hybrids — you know, the “self-charging electric cars” Toyota sells. But those are responsible for only 10% of new car sales in Norway. The rest are either battery-electrics or plug-in hybrids.
In fact, the Toyota RAV4 PHEV is the second bestselling car in Norway. The rest are all pure battery-electrics, with the Tesla Model 3 in first place and the Volkswagen ID.4, Volvo XC40, and Ford Mustang Mach-E in third, fourth, and fifth place, respectively. The bestselling car with an internal combustion engine is the Volkswagen Tiguan, which is way down in 38th place on the new car sales chart.
Thor Egil Braadlandhe, the government’s representative to NAF, says, “New car sales of petrol and diesel cars are dying out in Norway. If the trend continues from the last four years, sales will be over during the first half of 2022. It is far earlier than even the most optimistic electric car enthusiasts thought possible.”
ICE Vehicles Will Still Be Around
Before you go dancing in the streets to celebrate the demise of stinky, smelly infernal combustion engines, be aware that conventional cars are not going away completely any time soon. Erik Andresen, the CEO of Norway’s National Association of Car Importers says, “I do not think sales of pure petrol and diesel cars go completely to zero, because there are always some with needs that only such cars cover. But the small petrol cars will be replaced first. The bigger and more powerful the car, the greater the chance that there are customers who need one of these that are constantly delivered with a petrol or diesel engine.”
Braadland agrees. “It will still be possible to get a petrol or diesel car for many years to come. And there will be a good second hand market for these cars for many years.” According to Australia’s Drive, his point is backed up by data that shows 7 out of every 8 cars bought and sold in Norway is a used car. So far, sales of electric cars amount to only 12% of the used car market.
“Most people still own a used petrol or diesel car,” says Braadland. “Around 85 per cent of cars on Norwegian roads still have a petrol or diesel engine. But new car sales show that we see the beginning of the end for the fossil-powered car.”
According to NAF, tax incentives began the shift to electric vehicles, but now manufacturers have taken over. “The big drivers now are increasing selection, longer range, lower battery prices, and the EU’s climate policy. All the major car manufacturers now have a plan to electrify the car fleet. They have decided,” says Braadland.
The Tax Man Giveth & The Tax Man Taketh Away
Nothing good lasts forever. Now that the push to get electric cars on the road in Norway has been so successful, the government is rethinking its incentives. According to CarScoops, the country‘s next government is expected to be led by a member of the Labor party, which may introduce a 25% surcharge on electric cars that sell for more than 600,000 NOK ($69,882). A Porsche Taycan, for example, which starts at 777,000 NOK ($90,621), would pay a tax of 44,250 Norwegian crowns ($5,160).
The Labor party says that this policy is the result of a sense of fairness. “It is a subsidy. And the more expensive the car is, the bigger the subsidy,” Svein Roald Hansen, a Labor party tax policy specialist, told Reuters. “We have in the last couple of years received a lot of new models. There are plenty to choose from for those who still want to buy a car while there is a tax exemption,” Hansen said.
No less an authority than the International Monetary Fund has weighed in on Norway’s EV incentive policies, claiming its blanket tax exemption has cost the government 19.2 billion NOK. The money raised by a tax on more expensive electric cars could be put to use supporting other environmental policies.
The Norwegian EV Association, known as Elbil, argues this is a bad time to interfere with one environmental policy (the EV tax break) in favor of another whose outcomes are unknown. “Now finally the more rural areas are starting to buy more electric cars and it’s not the time to remove the tax exemption because we need to also get these areas with higher market shares,” said Christina Bu, Elbil’s leader.
It does seem more than a little odd that the IMF should think the Norwegian government needs any assistance from it to figure out what is best for its citizens. Now it will be up to the voters in Norway to decide who should lead them going forward.
The EV revolution has already succeeded in Norway. There is simply no going back now, which is pretty much what the government hoped for when it created its electric car incentive policies in the first place. People who live in Norway now breathe fewer pollutants and can expect to live longer. There are some benefits that are hard to quantify in monetary terms.