In October, the Norwegian government announced plans to increase taxes on electric cars in the form of a one-off fee based on vehicle weight.The heaviest cars would face a purchasing fee of $8,800 whilst for smaller cars it would be $900. Dubbed the “Tesla Tax” due to the popularity of the brand in Norway, the policy has left many scratching their heads. After all, Norway has been a leader in promoting alternatives to combustion cars for many years, so a tax hike on the vehicle they’re trying to promote is surely counterintuitive?
Norway has seen a huge increase in electric car sales over the last few years. Even in the last month, hybrid and electric car sales accounted for 60 percent of all car sales. As a nation, they hold the title of most electric cars per capita. This stems from technological improvements as well as government incentives. Rather than being counterproductive, the proposed tax reveals that electric cars are becoming increasingly normal.
Norway’s impressive figures show how their society is pivoting from combustion to electric, fuelled in part by generous government perks. Since the tax system is based on emission rates rather than engine power, a tax is currently not a concern for electric car owners. Even after the proposed tax reforms, however, free city parking, toll-free access to roads and ferries, and permission to use bus lanes will remain as incentives. Their retention means that despite being faced with a minimal price rise, potential electric car owners still have savings in the day to day usage. In big cities like Oslo, free parking and access to bus lanes can be pivotal, and those frequently driving long distances will be swayed by nationwide toll-free roads and ferries.
Currently, Norway is Tesla’s third largest market in the world despite having a population of just 5.2 million, and calculations suggest that the tax would have little impact on the sale price. On a Tesla Model S for instance, it would constitute a mere 2 percent of the final sale price. While the tax on the Model X is equivalent to 10 percent of its price because it is a heavier vehicle, it is still a small number when compared to the situation in Hong Kong, where a similar tax was introduced that increased Tesla prices by 180 percent and ultimately decimated electric car sales. Unlike Hong Kong, Norway’s tax is lower and the government offers more non-monetary incentives.The figures for Norway combined with electric cars’ already strong presence suggest that the tax will do little permanent damage to the end goal of ending sales of combustion cars by 2025.
Electric cars are becoming viable alternatives for Norwegians due to technological improvements along with the government’s non-monetary encouragement. Today the Tesla Model 3 boasts a range of three hundred to five hundred kilometers per charge, a range similar to combustion cars. This means an electric car no longer constitutes a lifestyle change. The price of the batteries has also decreased in the past few years which means electric cars are no longer an extremely niche market. According to a report by McKinsey & Co, the price of an electric car battery went from $1000 per kilowatt hour to just $227/kWh between 2010 and 2016. As a result companies such as Chevrolet, Tesla and Nissan can create entry-level cars with practical ranges. The electric vehicle market can now open up beyond the few who could afford the pricy early Tesla models.
There is also headway being made in hydrogen fuel cells research. This technology works by passing hydrogen through a cell and allowing it to combine with the oxygen in the air. The electricity generated can then be used to propel the car. This is exciting technology for the consumer on a practical level because it means refueling times with hydrogen rival those of combustion cars. Companies like Tesla and Nissan are thus incentivized to innovate further in order to maintain and grow their share of the Norwegian car market. This is because Norwegian lawmakers see the electric car as a viable competitor.
Companies and countries worldwide are adopting a similar stance.Volvo announced earlier in the year that by 2019 all their new models would be either hybrid or electric. Håkan Samuelsson, Volvo’s Chief Executive, told reporters at a press conference at the time of the announcement that the move “marks the end of the solely combustion-engine-powered car.” Britain and France also announced that by 2040 the sale of petrol and diesel cars would be banned, and China has called for one in five cars sold to be fuelled by alternatives to combustibles by 2025
The proposed “Tesla Tax” indicates that electric cars are becoming more common due to changing attitudes as well as technological improvements. These constant improvements in electric car technology, as well as its embrace by governments, corporations, and consumers bodes well for the future. The fact that electric cars are now viable competitors to conventional vehicles because of improved mileage, price range, and practicality means government incentives will eventually become redundant and companies will be spurred to innovate further. While Norway is currently a world leader in this embrace, other countries are close behind so we can expect electric cars to become a norm in the not too distant future.