Norway will become the first country to eliminate subsidies for electric cars from January 1, 2023, although only for the most expensive models.
Norway has long been the leading market for electric cars, but that may change as of January 1, 2023, when the Nordic country will cut aid for the purchase of battery-powered vehicles.
Unlike the rest of the European countries, electric cars are very popular in Norway and many see the Scandinavian country as an example to follow. There are several reasons that explain the high demand for electric vehicles in that country, but, basically, we can underline two: the absence of VAT (there it is 25%) and registration tax.
In addition, electric cars in Norway enjoy many other incentives that have to do with tolls or free parking areas, for example.
In 2021, 15.9% of the Norwegian mobile fleet were electric cars, almost four points more than in 2020, when they were 12%. And last November, there was a spectacular increase in sales of new electric vehicles, 27.8% compared to November 2021.
Norway will cut subsidies for electric cars
This notable increase in sales of electric cars in Norway is explained by the end of aid for the purchase of these vehicles as of January 1, 2023. This led many Norwegians to advance their purchase to continue enjoying tax advantages .
And why has Norway decided to do this? Basically, because tax collection has decreased significantly due to the electric car: about 1,800 million euros, according to calculations from the Norwegian Government.
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For this reason, on January 1 a new tax system comes into force that taxes electric cars whose price exceeds 500,000 Norwegian crowns (47,600 euros at current exchange rates) with 25% VAT.
This means that a BMW i4, which now costs 512,620 crowns (48,800 euros), will cost 640,775 crowns (about 61,000 euros). It is, as we see, a substantial price difference.
A specific tax for electric cars
But, in addition to the 25% VAT, Norway will apply a new specific tax for electric cars that will be related to the weight of the vehicle. Actually, the tax is aimed at all cars, regardless of the propulsion system, but hybrid and electric cars are the ones that suffer the most, since they are clearly heavier.
This will imply an additional tax that could reach 25,000 crowns, about 2,380 euros, according to the Road Information Council (OFV). This tax will apply to all vehicles, while VAT only to the most expensive ones.
In this way, Norway will become the first country to eliminate subsidies for electric cars, something that, on the other hand, has been rumored for a long time.
