EV Revolution: Taking Off

The Weekly Insights | Issue 3

What’s The Deal?

Norway has cemented itself as a leader in renewable energy by becoming the first country where the sale of electric vehicles has overtaken those powered by other means. Also, German automaker Volkswagen toppled Tesla to become the largest producer of electric vehicles in the country. As per the latest data, electric vehicles made up 54.3% of all new vehicles sold in the country in 2020.

Why Are Electric Vehicles So Important?

One might think about how significant electric vehicles are. Not only are they good for the environment but are also cheaper to own in comparison to gasoline cars. Let’s take a look at how this works out:

An electric car emits, on average, almost three times less CO2 than equivalent petrol and diesel cars. Furthermore, countries such as Norway produce almost its entire electricity from carbon-free sources, further reducing carbon emissions. And even though electric cars are more expensive (for the time being), the overall cost during ownership turns out to be lower as a result of lower running and maintenance costs. The cost of charging an electric car works out to around a third per kilometer in comparison to petrol and the vehicle requires relatively little servicing due to the low number of moving parts and systems.

Challenges Faced By EV’s Worldwide

Some of the major challenges faced by EV’s worldwide are lack of charging infrastructure, high charging time, limited driving range, high upfront cost and difficulty in finding electric car mechanics. Now, some of these problems are being solved by EV makers where they have brought down the charging time with superchargers and are also working on increasing the driving range. Further, with time, the cost of these cars will come down due to economies of scale. However, in the near term, EV makers still face significant hurdles in convincing consumers to purchase these cars.

How Has Norway Managed To Overcome These Challenges?

In 2016 the Government announced that by 2025 the country will ban the sale of gasoline cars. In 2010, EV’s made up just 1% of the overall market in Norway. Fast forward to 2020, the number has risen to a healthy 54.3% EVs and 83% including hybrids. This has been achieved through strong government leadership in the form of policies and incentives. Since the 1990’s the government of Norway started introducing incentives to purchase EVs. Currently, some of the incentives are:

  • No annual road tax
  • Maximum 50% of the total amount on ferry fares for electric vehicles
  • Parking fee for EVs implemented locally but with an upper limit of a maximum 50% of the full price
  • Access to bus lanes
  • Company car tax reduction reduced to 40%
  • No purchase/import taxes
  • Exemption from 25% VAT on purchase.

Some of the retired incentives which have also helped in the adoption of EV’s are:

  • 50% reduced company car tax (2000–2018)
  • Rules allowing local authorities to limit bus access to only include EVs that carry one or more passengers (2016)
  • Free municipal parking (1999–2017)

Further, the government also taxes petrol and diesel cars more heavily than most European countries. Norway has 10,000 charging stations. To put that into context, India which is more than 10 times the size of Norway has only 300 charging stations. All these factors have enabled the country to have the highest per capita all-electric cars in the world and have encouraged car makers around the world to use the country as a testing ground for EV’s.

Can Other Countries Replicate This?

It is difficult for other countries to implement this model mainly because Norway can provide strong subsidies and incentives through the significant revenue it earns from being the largest producer of oil and gas in Western Europe. The country has the world’s largest sovereign wealth fund (fund created by the government through surplus money), currently valued at $1.3 trillion. Nonetheless, their government’s strong leadership and stance on climate change has been exemplary and should be looked at by other governments around the world.