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Norway races towards electric vehicles leaving behind gasoline cars

  • Current state of EV industry in Norway
  • Factors that contributed to the growth of EV industry
  • Future of EV growth in Norway, especially after 2020

 

Norway, as a nation, generated wealth through the use of fossil fuels, but lately, the country became a world leader in EVs (Electric Vehicles).

While Norway generates ~12% of its GDP from the petroleum sector (one of the top 15 oil-producing countries), the country shifted its gears with nearly half of the new cars sold (2017) either being all-electric or plug-in hybrids. The nation ambitiously plans to end the sales of fuel driven cars by 2025.

Interestingly, the most important factor that has helped Norway’s transition is ‘electricity’. Moreover, for most nations, more electricity would mean additional dependence on fossil fuels (primarily coal), but the landscapes in Norway provides with cheap (zero emission) hydroelectricity, which is just sufficient to meet the needs of its population and thus plug-in EVs does not burden the grid. The abundance of clean and cheap hydropower enabled the transition to electric vehicles with a net reduction in greenhouse gas emissions. This is significant given the country’s efforts to meet the UN climate change goal for the reduction of emissions by at least 40% by 2030.

The country has a population of about 5.2 million and the highest per capita for all-electric cars (215.6) in the world.

According to the ‘Norway’s Road Traffic Information Council’, the electric cars accounted for 17.6% of new vehicle registrations (January 2017), while hybrid cars accounted for 33.8%, resulting in a total of 51.4%.

The sale of EVs was supported by Norway’s investment in the infrastructure, this led to the development of an extensive network of charging stations. Hence, with a continuous investment, the government intends to install charging points every 50 kilometres on the main roads and is giving subsidies to firms that build and operate these points. Furthermore, earlier this year Norway opened the world’s largest fast-charging station, this is capable of charging up to 28 vehicles (across all charging standards) in roughly half an hour.

The Chademo standard is preferred by the Asian carmakers, but all German and the US carmakers except Tesla are committed to the Combined Charging Standard (CSS). However, Tesla uses its own unique supercharger standard and plug.

Norway boasts of ~6.3 Tesla superchargers per million, while the US (a major car market) merely has ~1.2 superchargers per million. Additionally, it has been reported (November 2017) that a new network of about 180 EV charging stations will stretch all the way from Norway to Italy. This network will be funded by the EU with a cost of ~10 million euros or $12 million.

The Norwegian transportation sector, along with other sectors, is heavily taxed including the registration taxes on new vehicles, annual taxes, the fee for usage of toll roads and taxes on fuels. The government exempted all-electric cars from the country wide car-purchase tax as well as from the 25% sales tax, which is applicable to almost all Norwegian goods. In addition, Norwegians bear few of the highest rate of taxes in the world (~45% of GDP comes from taxes), hence, exempting EVs from the tax bracket made the purchase of these vehicles fairly lucrative for customers. Likewise, electric car drivers were allowed to plug-in and charge their EVs for free at municipal power points and ply without a charge on toll roads and ferries. EVs are also allowed to use bus lanes to avoid getting stuck in the traffic. But in spite of these policy initiatives that were available back in the 90’s, the residents barely took advantage of the perks (see chart below). In the light of aforementioned incentives, the market took off when better electric car options such as Tesla Model S and Nissan Leaf hit the market.

The Volkswagen Golf and Nissan Leaf models that typically costs $24,600 and $35,000, respectively in the UK, would cost around $42,000 and $42,5000, respectively in Norway. This is due to the imposition of one of the highest level of taxes in the world. Presently, the cost difference for owning an electric car vis-à-vis a conventional car in Norway is listed below:

Hence, substantial subsidies allowed Norway to speed up its EV adoption program, which is far beyond other countries. However, this costed the government tens of thousands kroner in tax revenue each year. Thus, beginning January 2018, the Norwegian government is doing away with a part of the incentives, wherein EV buyers will pay half of the yearly road license fee and full rate by 2020. There were also discussions this year on reducing the incentives (removal of a one-off tax exemption offered on purchase of EVs), which will primarily be targeted towards heavy, large or luxury models (weighing over 2 tons). This provision would have affected most of the Tesla’s offerings and similarly EVs of other manufacturers.

Norway decided to keep this proposal on hold at least until 2020 fearing a backlash and an anticipation of a major dip (much like Denmark) in the industry, the nation hopes to switch a significant number of its fuel driven cars to EVs. This raises the most critical question, would EVs have succeeded in Norway in the absence of the fiscal incentives? The answer in all likelihood is a no.

In conclusion, it can be stated that the EV industry may not have blossomed in the Norway without the big-fat financial incentives. Televisory believe, the road ahead entails for the industry to further technologically advance its products both in terms of models as well as further reduction in battery costs while improving battery capacities to alleviate range anxiety. Norway has so far achieved tremendous success in EV conversion, but with the withdrawal of several incentives by 2020 and other imperative factors such as ease of charging, better battery capacities and competitively priced EV models are equally crucial. These aspects may also decide whether Norway will be in a position to achieve its ambitious target of phasing out fuel driven cars by 2025.

In the face of the climate change, it will be interesting to observe how nations like Norway meet their target of phasing out gasoline cars in an era of reduced tax breaks and incentives after 2020.