Norway collects less taxes because of the electric car. And that will change

Year after year, Norway presents figures for the sale of electric cars that leave half the world perplexed. Thus, for example, 77.5% of new cars sold in Norway are electric and Tesla has a 30% market share. For many it is an example to follow, although it is a very peculiar example.

Norway’s electric dream stems from a series of tax breaks and other financial aids that make buying a car with a combustion engine meaningless to most motorists. But these incentives, or rather their success, have created a unique problem: in Norway the collection of taxes has dropped notably because of the electric car And this is a problem.

Buying a new car in Norway entails the payment of a VAT of 25% and a registration tax calculated on the basis of the CO2 emissions of the car in question. But there are exceptions. With the purchase of an electric car you do not pay VAT or registration tax.

There are other exceptions to the registration tax, the most common being classic cars (over 20 years in the case of Norway), cars converted to run on ethanol, and any car purchased by a Svalbard resident. There are also other exceptions, but they are even more anecdotal, such as rally, diplomatic or NATO cars.

But with a market share of almost 80% for the electric car, while the rest are plug-in hybrids, with cars with internal combustion engines being the absolute minority, Norway has seen its VAT collection drop markedly.

The success of the electric car seems to be due to incentives

Volvo C40 Recharge

The previous government – a center-right coalition that was replaced by a center-left minority government in October – estimated that the popularity of electric vehicles was creating a NOK 19.2 billion hole (€ 1.878 billion) in the annual income of the country. Although electric vehicles can be great news for the environment, their rapid success in Norway is causing a tax problem.

The problem was that the people responded so well to the policy that it eradicated a major source of revenue for the government, says Anette Berve, spokesman for the Norwegian Automobile Federation, a group representing car owners. “So this is a clash of two different goals.”

In an attempt to recoup lost revenue, authorities are stripping electric cars of their special status, prompting intense debate and concern that the country may put in jeopardize your goal of not selling any new car with a combustion engine by 2025.

Cupra Formentor

The toll waiver was the first to disappear in 2017. Now, Norway’s center-left coalition government is considering removing a much broader list of incentives as part of ongoing budget negotiations, but certainly the most striking is that of reapplying VAT to electric cars of more than 600,000 crowns (58,700 euros).

The limits of the incentives to buy an electric car

It is a striking measure, but it affects especially brands with the most expensive models, such as Audi, Porsche or Tesla. In principle, the impact on electric car sales should not be very significant, even for prestigious brands. For example, the base Tesla Model 3 in Norway costs 407,000 crowns and the Performance version is close to 500,000 crowns. Another example, the Audi Q4 e-tron 50 costs 382,500 crowns.

However, although the impact may not be significant in terms of sales volume, the Norwegian experiment reveals two unknowns for the rest of Europe when it comes to imposing the electric car.

Tesal Model S Snow

The first question has to do with the car itself and the incentives. That is to say, Could the electric car be imposed without incentives? In Norway, the extreme has been reached where buying a non-electric car is giving away money to the state.

For example, a CUPRA Formentor e-Hybrid with 245 hp is more expensive than a Tesla Model 3. The Formentor costs from 439,000 crowns (43,7000 euros) and the Model 3, from 407,000 crowns (39,000 euros), for many people there is no color . And that the Formentor enjoys there a registration tax of about 235 euros. And is that in case of importing a 310 CV Formentor -which is not sold there- the registration tax would be about 15,300 euros.

Skoda Enyaq

Currently, there is no country that has significant sales of electricity without resorting to incentives. There is no doubt that Tesla and Porsche could continue to sell electric cars without incentives. But that has more to do with the attractiveness of the brands than with the type of propellant.

And from there the second unknown is intuited. Until when should the incentives be maintained? Encouraging the public to buy electricity increases their number in the fleet, but at the same time, revenue is lost.

There will come a time when these incentives will have to be eliminated or new taxes will have to be created to maintain the level of collection if cuts are not wanted. When is the right time?

Oslo street, Norway
Only 12% of the Norwegian fleet is electric.

Norway’s vehicle fleet consisted of 2,823,543 passenger cars in 2020, of which 340,000 were electric cars, 146,000 plug-in hybrids and 125,000 hybrids. Electric cars make up 12% of Norway’s mobile fleet. And with less than a quarter of the fleet converted to electricity, Norway is already noticing the lack of collection.

In addition, in the case of Norway, let us remember, we are talking about the seventh world producer of oil and gas for which the extraction of fossil fuels accounts for 62% of its exports and 18% of its GDP. A priori, for a time it could compensate for this lower collection, but this is not the case in other countries.

In any case, it will be interesting to see how sales evolve once VAT has been reintroduced for the more expensive electric cars, if Norway decides to extend the application to cheaper electric cars or if it backs up and maintains the VAT exemption.

In Motorpasión | We tested the CUPRA Formentor: a 310 hp SUV that denies its nature, is full of character and dynamically shines

Source: Motorpasión by

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