It’s long been the poster child for electric car incentive programs, showing the rest of the world that generous incentives and a grid powered almost entirely by renewable power makes owning and operating an electric car a no-brainer.
With generous plug-in incentives that include zero sales tax, free parking and charging and even the ability to drive in bus lanes, Norway’s electric car market share passed from niche to mainstream a long time ago. Created to help Norway hit a target of 50,000 electric cars on its roads by 2017, the incentives have been far more popular than anyone imagined.
On Monday, the country reached that goal more than two years early with the official registration of its 50,000th electric car, a brand-new Tesla model S.
As Hybrid Cars reports, the car — wearing plate number EL 60000 — was present for a special event held by the Norwegian Electric Vehicle Association at Drammen Harbor, a 40-minute drive from the country’s capital city of Oslo. For the curious, EL 60000’s 10,000 number disparity was caused when Norway decided to start electric car registrations at EL 10 000 rather than EL 0.
For Norway, a country with a population of just 5.14 million, reaching a total of 50,000 electric cars on its roads is a significant achievement. But those incentives have also cost the Norwegian government a significant amount of money: last year, Norway’s Minister of Finance Div Jensen commented that Norway’s electric car was costing the country between $384 million and $512 million in lost tax revenue per year.
That’s because Norway levies a one-off tax on all new cars proportional to their tailpipe emissions, as well as adding a VAT (value added tax) to the price of the car. With electric cars exempt from either emission-based tax or VAT, Norway has had to dig deep to make up that income gap.
Now, it’s faced with a tough decision: continue electric car incentives and remain the world’s number-one market for electric vehicles; or end the incentives as planned when the total of 50,000 electric cars had been sold.
Norway’s parliament is expected to discuss future plans for plug-in incentives in the coming weeks, but from where we’re sitting, the country has three main choices.
The first would be to keep things as they are at the moment, allowing electric vehicle sales to continue on an upward climb. With plenty of excess green power thanks to its large hydroelectric power stations, this option would enable Norway to significantly reduce the carbon emissions associated with transportation. It would however require the country to continue to dig deep from a financial perspective.
The second would be to end all incentives, risking a backwards slide in the number of electric cars on the road as those who would have chosen an electric car for fiscal reasons find themselves opting for a gasoline equivalent instead.
The third would be for Norway to offer continued incentives but at a reduced rate. This could either take the form of rescinding one or more of the existing perks for EVs, or through the introduction of a reduce taxation rate for new plug-in cars. With Norway’s bus lanes now clogged with zero emission electric cars, removing that particular perk could make public transport run more efficiently, but it would increase the commute time for existing EV owners.
A partial tax however could work both ways. Lower than taxation for internal combustion engine vehicles, a partial tax would recoup some of the costs lost since the introduction of EV incentives, but would still offer car buyers a financial reason to choose an electric car over a gasoline or diesel one.
Which of those three solutions will be used remains to be seen — or if indeed another solution is found. When a solution is finally agreed upon, you can be sure that the eyes of the world will pay attention too, because it’s a problem that other nations offering incentives may one day face if global electric car sales continue to rise.
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