Norway: When The Boom Of Electric Vehicles Becomes A Problem

In Norway, a tipping point has been reached this year. The Scandinavian country is the first ever where half of the sold cars last month were electric vehicles. Driven by the boom of the Tesla Model 3, 2019 electric vehicles had sold better than ever before – although sales were already outstanding. In 2018, almost every third car sold (31.2%) was electric.

Significant incentives

Yet this high proportion of electric cars is now a problem for Norway. The boom was not just because of the environmental friendliness of the population but slightly boosted by substantial government subsidies. For example, buyers of electric cars pay neither 25% VAT nor tolls on roads or ferries, which are an essential transport alternative in Norway. Also, buyers of e-cars are free from vehicle taxes, the motor vehicle tax frees the electric buyers, and they get a 50% discount on weight taxes (although batteries of electric cars are hefty).

Logically, these significant tax incentives have now resulted in a hole in the budget of the small state. In 2018, Norway lost 3b krone in revenue (almost €300M) due to the many subsidies for electric cars. Finance Minister Siv Jensen had to compensate for this minus just by funds from the state oil fund. Norway is a country rich in oil and natural gas and exports raw materials. The country itself mainly relies on hydropower – so e-cars that are on the road are also pretty “green”.

E-cars are getting more expensive

Despite the problems that electric cars incentives have caused, Norway wants to stick to its ambitious plans. From 2025, only zero-emission cars could be registered. In order not to bring the state revenue entirely out of balance, probably new taxes and fees for electric vehicles will have to be introduced. The first signs are already there: In several regions, drivers of electric cars already have to pay half of the toll.
Also, the free charging stations, which existed in Oslo until this year, caused problems. Just over 12% of the cars in the Norwegian capital are electric – and because the electricity was free for them at the approximately 1,300 charging stations in the city, the stations were overrun continuously. The municipality eventually introduced fees (about €1/ hour) to bring more rotation in use.