No country has more clearly demonstrated a unified effort to switch to plug-in electrified vehicles (PEVs) than Norway, and this Monday it’s expected to reach a 50,000-unit sales threshold on generous incentives propping up the enterprise.
As it reaches this ceiling limit of PEVs eligible to receive financial and convenience-oriented benefits encouraging their sale, the country has come to a crossroads.
Next month its government will decide whether to continue perks that have fostered the world’s highest percentage of PEV sales, or begin dismantling them and see whether Norway’s radical changeover to electrification can stand without them.
UPDATE April 20: Car number 50,000 – a Tesla Model S – was awarded today as reported would happen.
For the past couple of years stories have come forth of an accelerating headlong rush to change out the kinds of cars on the roads of this small nation of around five million people. In March an astounding 26.4 percent of all new car sales were PEVs. Compare that to the U.S. purchase rate of around 0.75 percent PEVs for the same period.
Factoring existing vehicles on the road, there’s room to grow in Norway however, and total market penetration of registered vehicles is now over 2 percent – sizable but not at all comprehensive.
This week 49,750 out of 50,000 had been purchased, so will Norway allow the PEV takeover to continue at its presently blistering pace?
Norway Has Outdone Itself
Fourteen years ago, when battery electric cars were little more than glorified plastic golf carts legal for the street, Norway established its scheme to penalize internal combustion cars, and encourage battery electric cars. It was not messing around either, proffering all sorts of incentives, but these are set to expire by 2017 or when 50,000 zero-emission vehicles are sold.
Incentives now enjoyed include free access to bus lanes, free tolls for highways and ferries, free municipal parking, and of course one sweet deal on Value Added Tax (VAT).
By contrast, if a Norwegian wants an uber powerful Porsche 911, that’s no problem. But that buyer can expect to pay 100 percent tax over the sticker price. Now, a Nissan Leaf? That’s really no problem, this one is VAT exempt, and guess what kind of car people are overwhelmingly buying more of?
On Monday the Norwegian Electric Vehicle Association is preparing to celebrate the milestone of the 50,000th PEV sold by presenting a license plate “EL 60000” to number 50,000. All EVs have special plates beginning with EL, and the first in sequence began with “EL 10000.”
This moment has been seen as coming fast upon them. It’s now decision time, and during settling of its annual budget this May the country will need to decide what to do about the problem of its success.
Already some have been complaining the perks are too good; PEVs are clogging up the bus lanes and otherwise proliferating at a rate that’s cascading into unintended consequences.
According to Norwegian publication e24, voices range from advocating a phasing out of the benefits to raising the PEV sales total ceiling to push for nine out of 10 PEVs by 2020.
A year ago, Minister of Finance Siv Jensen explained during her presentation of the state budget that the county’s current tear toward PEVs taking over has cost state coffers three to four billion krone ($384 – $512 million) in tax revenue per year.
Last fall she proposed cutting car taxes 1.35 billion krone ($173 million) and promised a comprehensive review for this year.
With the reaching of the cap, and time as promised approaching, that budget review is coming due.
Norway’s Parliament and four non-Socialist parties will now be negotiating on what to do with the budget as it pertains to cars and consequent ramifications that affect the tax base beyond the car question.
Progress party fiscal spokesman, and Tesla owner, Gjermund Hagesæter who’s on the Parliament council that’s negotiating the new car taxes said it’s probably to the country’s advantage if VAT be phased back in for PEVs.
On the other hand, Conservative Linda Hofstad Helleland, leader in the Parliament’s Transportation Committee said the benefits should practically not be removed at all.
But, said Helleland, some perks may need to be adjusted by municipalities on a case by case basis. For example, free parking for PEVs is something that can be left to local authorities to decide, she said.
Even Hagesæter said what the Norwegian government will decide is still fuzzy, but PEVs will continue to be favored.
Actually, of “PEVs” it is battery electric cars that overwhelmingly constitute current sales. In March, for example, out of 14,159 total new passenger vehicles sold, 3,391 were the battery electric variety and just 357 were plug-in hybrids.
The country’s top selling new PEVs in March were all battery electric vehicles, the Model S with 1,140, VW e-Golf with 956, and Leaf with 526.
But if Norway wants to keep it that way, the incentives need to stay in place urged Liberal Abid Raja.
“The reality is that if you remove the tax exemption for EVs today, almost no one will buy electric cars,” said Raja (translated). “People are going to stop buying the Nissan Leaf if it goes up 40 or 50 percent in price.”
Raja said they are fighting for most benefits to stay as is, but is also open to adjustments for practicality’s sake.
For example, said Raja, municipalities should be able to restrict electric vehicle traffic lanes on stretches where cars are in queue.
Environmental and transport policy spokesman Heikki Holmås said just as adamantly that Norway can’t stop now.
“Norway must implement the EV revolution, not pull up the handbrake before we are halfway,” said Holmås. “By 2020 nine of 10 cars sold must be zero-emission vehicles” and the benefits must be maintained “so that it is always cheaper for people to choose an electric vehicle rather than fossil cars in the same class.”
Norway has seen rapid acceleration with the benefits in place that are essentially a carrot and stick approach to get people out of big SUVs, high-powered sports cars, and big luxury vehicles, and into generally smaller zero-emission cars.
Tesla is leading the charts because its Model S of course gives people what they really want – all the benefits of incentives along with a big powerful car up to 700 horsepower without the gasoline or penalties they’d otherwise have to pay.
At this point the Treasury is proposing a gradual phase out, but the negotiations are not settled as the country continues to outdo itself with its presently unequivocal mandate and incentive to get off of petroleum.
If PEV benefits are left largely intact this May, will there be any stopping Norway from increasing its goal to zero-emission vehicles comprising 90 percent of all new cars sold by 2020?
Thanks to Mario R. Duran for research leading to this report.