The Norwegian EV Story

Norway, the land of midnight sun, a country that has displaced every other country in terms of per capita EV market penetration. As on date it has hit 64.4% in EV market share, up 24% year on year. This makes a story which is worth to be written.

Lets first understand the demographics of Norway. The country enjoys the second largest coastline in the world, is made of more than 50,000 islands and is gifted with very high oil reserves. Also, something to take note of is, 99% of Norway’s power comes from hydro. The country is very closely knit, with a total area od 148,729 Sq. m. and the ambient annual temperatures are pretty low. The question is why we are discussing these points, its because all of these are gifted enablers which the country possesses. These already gives enough impetus for the growth of electric vehicles in the country, but Norway has achieved the position of leadership in per capita market because of the various other measures that the country has taken over time. This article throws light on the same.

“Polluter pays Principle”, that exactly what Norway terms its policy as. As government officials say, “Vehicle electrification in Norway is brought about not by generous subsidization, but quite the contrary – by stiff taxation”. The tax collected from the ICEs are used to develop the EV infrastructure and encourage people to shift to EVs. In-fact the story started way back in 1990 when the Government realized the perils of rising air pollution. The first policy came in the form of temporary exemption of import taxes for ZEVs. Overtime, the Government came up with various other incentives for pushing EVs, these included; no registration tax, no annual ownership tax, no fuel tax, partial/ fully exempted road tax, reduced ferry tax, preferential parking, access to drive on bus lanes. Understandably, even after all these incentives the EV adoption did not grow in the country then till late 2010 because there was no EVs to buy in the market. Finally, in 2010, people saw i-MiEV driving in the bus lane, then came Nissan Leaf in 2011 and the thereafter it never looked back. Today the country almost has one EV in every 2 vehicles being sold. S, with these incentives and the added taxes on ICEs, the on-road price of an EV becomes almost 12% lower than its corresponding ICE Model, remember this excluding the running maintenance and fuel costs.

The below graph helps us understand how the same is realized.

Analyzing the graph, it can be seen that though the import price is still quite high for an EV, by the subsidies that the EV is given the overall price is lower than its ICE counterpart. With the largest pie being the value added tax which for ICE is 25%.

This has led to mass adoption of EVs, so much so that today it has become normal to own an EV. There has been criticism on the excessive incentives that are being given to ZEVs by the Norway Government and to some extent its justifiable too. The target that Norway has set to have all car sales by 2025 as ZEVs has been termed over optimistic by Economists (the nearest country is Denmark who has projected 100% ZEV sales by 2030). Economists believe going by the trends, 80% is doable.

Many strategists believe that it has been easy for Norway, given its population and compactness, for bigger countries with higher population its difficult to have such high incentives in place. It also needs a huge political support and tax aggression can be suicidal. For Norway, which enjoys a very stable GDP and has many social benefits in place like fully subsidized health care and schooling, acceptance is easier. Norway is also blessed with rich oil reserves, which serves for 43% of its total export, 21% of the country’s revenue and the largest contributor to GDP at 17%. There have been questions whether the incentives being given to EVs is coming from higher oil extraction (which also means higher CO2 emission, which is in contrast to the Government’s mission to reduce CO2 emission from vehicles by 2020 in the National Transport Plan). But the good point here is over time the Norway Government has also slowly started to take off the incentives partially making it clear that the incentives are temporary.

It has been a short-term planning for Norway and that is a very big reason for it to reap the benefits today. Research on EVs started way back in 1970s based on air pollution, 1990 saw the start of policy and incentive roll-outs for supporting EVs, the fruits of those investments started much later in 2010. But thereafter the increase in market share has been tremendous. It realized 50,000 EV goal by 2015

much before its target. In 2016 itself Norway has 21.5 plug-ins per 1000 people, which has been the highest EV ownership. The growth has been phenomenal, in April 2019 alone, 60% of all new car sales was EVs. Sales has risen by almost 10% in 2019 w.r.t. 2018. Projections show that by end of 2019, Norway will surpass 50% EV market share. Being powered through hydro power majorly, Norway’s EV transition has been termed as a cleanest in the world. Norway has also sufficiently invested on charging infrastructure, it made charging free for citizens (in 2007) and this further increased the transition attractiveness. In 2017, the Government discontinued the free charging incentive, once the market was mature. Today Norway has more than 1000 chargers installed.

In summary, Norway has clearly benefited from being early in the race. What worked for Norway has been gaining stakeholder and public confidence from the beginning, proper engagements with end customers, strong political commitment, clear objectives backed with solid action plans and customizing correct strategies for all stakeholders involved. As I write this, 7,000 Norwegians are waiting to have their Kia-e-Niro delivered. In 2019 alone, 75,000 new EVs are registered in Norway. The Government waits to launch their National Transport Policy to curb down of CO2 emission heavily and the country for the first time sees a Demand Supply crunch as manufacturers wait for the policy on strict CO2 emission to go live to inculcate in larger gains based on market sentiments. It’s a great position to be in, where the market itself now crating demand and the eagerness from the end customers to go electric. What is noteworthy here is the fact that even after removal of incentives partially/ fully, the market growth has continued and not fall as it is commonly perceived. Norway has a lot to show the World in terms of how long-term planning and laying of correct policies and incentives can actually drive adoption in a sustainable way in today’s dynamic market.