Norway Under Pressure to Reduce EV Incentives

With now 15 percent market share for electric cars, Norway has been on a tear to move away from petroleum, but is it now teetering on the edge of being victimized by its own success?

This remains to be seen, but more certain is the Norwegian government has been facing increased pressure to reduce tax breaks, incentives. and special privileges that have made the tiny country of 5.4 million the world’s largest per capita consumer of electric vehicles.

Among the list of incentives offered by the Norwegian government is the right to use bus-only lanes in urban centers. EV owners are also exempt from paying urban tolls and do not have to pay for public parking spaces where they can also hook up to charge ports for free. However, the most alluring incentive is the fact that EV sales are exempt from Norway’s sky-high sales taxes as well as the VAT (value added tax).

For Oslo bus drivers like Erik Haugstad, EV access to bus lanes has been a growing concern and an increasingly frustrating problem.

“I’m a bus driver and I want to transport my passengers as quickly as possible,” . So, I’d like electric cars to leave the bus lanes, where they’re getting in my way,” Haugstad said. “These delays have a cost for society. Time lost by thousands of our passengers in traffic is far greater than that gained by a few dozen electric car drivers.”

Haugstad said the cars can create a vicious circle — tired of being stuck in traffic, bus users could be tempted to buy an electric car themselves, worsening the congestion problem.

Electric cars already represent 85 percent of traffic in bus lanes during rush hour, according to a study by the Norwegian Public Roads Administration on a busy stretch of road outside Oslo. While no decision has been made so far to address this problem, it seems likely that steps will be taken to reduce the congestion in the bus lanes – especially during rush hour.

The incentives have been incredibly successful to this point. There are more than 39,520 registered through October 2014 in Norway – a staggering number for a small country. Tesla Motors cites Norway as its second-largest market, after the U.S. In fact the Tesla Model S set a Norwegian sales record in March 2014 for selling the most units of a particular model during a one-month period in history.

While Norway enjoys a high-standard of living, the huge sales success of the Model S, which starts at around 60,000 euros ($74,000) can’t be traced necessarily to wealth. With EVs being exempt from sales taxes and VAT, the cost to purchase a similarly priced non-EV would be close to double.

SEE ALSO: Norway’s EV Market Share Is Skyrocketing Past 15 Percent

The Norwegian government had originally planned to keep the incentives in place until 50,000 EVs were on the road. Projections were that this would take until 2017, but the surprising success of the program and over 40,000 registered already, the government to re-evaluate the program.

At the present sales rate of about 2,000 per month, the cap will be reached by March or April 2015.

Still, there remains strong support for the continuation of the program and all of its incentives.

“It’s too early to remove the fiscal incentives. The market isn’t competitive enough yet compared to that of fossil-fuel-driven cars” said Christina Bu, general secretary of the Norwegian Electric Vehicle Association. “If the tax and VAT exemption ends, the market could collapse and it would be hard for Norway to reach its climate goals. We must increase the number of electric cars, not reduce it.”

A recent survey by the association showed that 48 percent of EV buyers in Norway did so to save money. Only 27 percent said it was for environmental reasons while 12 percent said they purchased an EV to reduce their commute times.