By on April 21, 2015

Tesla Model S delivery to Høyres Nikolai Astrup in Norway

The law of unintended consequences has found another victim in Norway as the nation re-assesses its electric vehicle incentives amid soaring sales.

Monday marked the 50,000th EV sold in Norway since the nation implemented incentives in 2012 meant to encourage electric-vehicle adoption among its citizens. The incentive includes toll and parking fee exemptions, free use of charging stations, and bus-lane usage in addition to the usual tax credit scheme, Reuters reports. The milestone arrived three years earlier than expected by the government, whose official data shows that one-fifth of 2015 new-car sales in Norway are of electric models. Norway, a nation of 5.1 million, now accounts for one-third of all battery-powered vehicle sales in Europe based on 2014 sales figures.

As such, the nation’s finance ministry is looking to revise those incentives, especially in light of losing kr3 billion to kr4 billion ($380 million to $510 million USD) in revenue, as well as complaints about increased sales of the Tesla Model S, which made up 3 percent of overall EV sales last year. The latter issue has led to calls from critics to remove the incentives for wealthy consumers.

The finance ministry will present the outcome of its review when the revised budget is presented May 1.

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59 Comments on “Norway Set To Review EV Incentives Amid Soaring Sales...”


  • avatar
    jmo

    Aren’t soaring sales of EV the intended consequence of EV incentives? Why do you think these results are unintended?

    • 0 avatar
      Pch101

      The EV program has provided an incentive for more people to drive, as affluent workers swap their train tickets for car keys. They’re congesting the bus lanes in the process.

    • 0 avatar

      Norway’s government didn’t intend to lose as much revenue from the program as it had, nor did it likely believe the loss of revenue would occur as quickly, as well.

      • 0 avatar
        Zykotec

        The laws were made back when no one really wanted a EV. Nobody thought that there was going to be such a thing as ‘luxury-EV’s back then.

        • 0 avatar
          highdesertcat

          In America, maybe they still don’t.

          http://www.usatoday.com/story/money/cars/2015/04/21/earth-day-electric-ev-hybrid-dissatisfied-suv/26121125/

          • 0 avatar
            thelaine

            Nice article HDC. Generally, Americans like bigger, more powerful vehicles and forsake them only when they must. You need high gas prices and big taxpayer bribes to get some onto mini or battery powered cars.

            As soon as they can, most drivers switch back.

            The subsidies and mandates are expensive boondoggles that have virtually no meaningful positive impact except to force a transfer money from the unlucky to the favored few.

          • 0 avatar
            highdesertcat

            thelaine, you hit the nail right on the head!

            And it must really get the EV-fans in a frenzy that so many stupid Americans cannot see that EVs are the answer to America’s biggest ill, namely Big Oil.

            My brother in NYC owned a Leaf. Sold it and is never going back to an EV no matter how high the price of gas gets in the future. Continues to own an F150 and a Camry V6.

            A friend and his wife recently traded their 4-yo Prius in on a ICE Camry 4-cyl LE. He still has his F250 but his wife now tools around in a 2015 Camry.

            I think that there is a place for EVs and PEVs in America, and people should be able to buy one here, albeit without a taxpayer subsidy. What works in Norway doesn’t necessarily translate well into working in America.

          • 0 avatar
            This Is Dawg

            From HDC’s linked article:

            “Overall, only 45% of this year’s hybrid and EV trade-ins have involved the purchase of another alternative-power vehicle, Edmunds data show. That’s down from slightly more than 60% in 2012 and is the first time the rate has fallen below 50%.”

            Now I don’t have any data to back this up, but is it possible that, as well as for other reasons, this could be due to current non-hybrids being noticably more fuel efficient than they were 5+ years ago when all these people bought their hybrids? Seems possible to me that the regular models of the same cars caught up and the hybrid versions are no longer worth the extra cost.

            Obviously I’d need a lot more data to believe this though.

          • 0 avatar
            highdesertcat

            Dawg, I think you got it right! But there are people on this forum who will argue ’til they’re blue in the face that we are wrongly interpreting the “facts”.

            I think there are a lot of factors that go into forays like EV adoption. It may have been new and intriguing when they first came out, and tittillating for early adopters, but there are a number of issues to contend with, among them Range Anxiety and the cost of electricity at home.

            So I say, ’nuff sed!

  • avatar

    The same discussion I see developing in the Netherlands, where the costs of fiscally favoring low/zero emission cars has costed close to 7 billion euro since the start of the program in 2007. That’s the equivalent of 150 billion USD on a U.S. scale!

    Now Norway forms a strange case. It generates nearly 100 percent of its electricity from hydro-power, what makes the shift to battery powered cars an obvious choice. But it is also Western Europe’s biggest oil and gas producer with about 3.7 million barrels of oil on a daily basis, its offshore energy sector accounting for one-fifth of the economy. Nonetheless Norway’s fuel prices at the pump are the highest in the world.

    • 0 avatar
      jmo

      “Norway’s fuel prices at the pump are the highest in the world.”

      And Venezuela’s are the lowest. I’ll leave it up to you who is doing a better job managing their economy.

      Personally, I think using their vast hydro resources to power their vehicles and exporting all their petroleum and banking the money seems ideal.

    • 0 avatar
      Pch101

      Norway would rather export the oil, which is wise.

  • avatar
    jkross22

    When a gallon of gas is $9.97

    http://www.chron.com/news/slideshow/Ranking-gasoline-prices-around-the-world-65026.php

    It’s understandable the run on electric cars.

    Yeah, a $160 fill-up would push me to an electric car, too.

    • 0 avatar

      Obviously Norway does a far better job than Venezuela. Still, there’s an interesting paradox in making so much money from fossil fuels and making these very expensive for the Norwegians to be enjoyed, while expecting to continue to make that much money because the rest of the world is still addicted to them… You make something terribly expensive by taxation, so the government’s revenue can be spend on subsidizing zero emission import cars. Would have made perfect sense if Norway was densely populated… Now it’s mainly benefiting Mr. Musk.

  • avatar
    1998redwagon

    more than just lost revenue, it matters to norwegians how it is being lost. norway is one of the most egalitarian societies in the western world and having certain portions of the populus receiving advantages the others do not enjoy is particularly galling.

  • avatar
    stingray65

    The big jump in sales is due to the fear that the government gravy train will end, because incentives were only supposed to be for the first 50,000 EV sales. I’ve just had a paper published that examined the cost effectiveness of Norwegian EV subsidies, and Tesla buyers are getting the equivalent of almost $50,000 discounts from just the break of new car taxes, so they make up about 30% of new EV sales (not 3% as the article states). When compared to the lost tax revenue, the value of the emission reductions results in a government ROI of approximately -70 to -90% depending on what assumptions are made regarding the value and use of free parking, free electricity, free road tolls, etc. The funny thing is that socialist Norway is giving its richest citizens free money so they can feel green, but it will be interesting to see what sales do if incentives are dropped. I predict a major crash, particularly for the Tesla which is not the type of car that Norwegians would usually buy (much too large for typical parking spaces, and not a station wagon/CUV).

    • 0 avatar
      jmo

      “so they can feel green,”

      With 99% of their electricity from hydro it’s more than a feeling.

      • 0 avatar
        stingray65

        The problem is that Norway exports most of their oil and gas, much of which is likely burned by dirtier vehicles than if it stayed in Norway. Norwegian politicians also did not consider emissions from production and scrapping, and recent papers suggest that EV manufacturing generates about 50% more greenhouse gases that a comparable gasoline car, which means you need a lot of zero-emission driving to make up the difference. Therefore, on a global lifecycle basis it is very unlikely that Norwegian EV owners are actually any greener than their non-EV driving neighbors who have subsidized their Tesla or Leaf.

        • 0 avatar
          jmo

          “. Therefore, on a global lifecycle basis it is very unlikely that Norwegian EV owners are actually any greener than their non-EV driving neighbors”

          That might be true if they got most of their electricity from coal or natural gas. With 99% of their electricity coming from hydro you are totally and completely wrong.

          • 0 avatar
            stingray65

            When you get a paper accepted and published in a peer reviewed journal, let me know because I will then you take you seriously.

    • 0 avatar
      thelaine

      Tesla exists due to subsidies. Lots of clever wealthy people have made money from “green” government mandates/subsidies.

      • 0 avatar
        SCE to AUX

        Please explain which subsides Tesla bases its existence upon.

        I’ll help:
        1. The federal loan which was fully repaid years ago?
        2. The $7500 federal rebate program, which has 3 times the impact for Leaf and Volt buyers?
        3. Carbon credits, of which Nissan sold 664, Tesla 650, and Fiat 235 last year?

        • 0 avatar
          Pch101

          He just spews cliches, and he doesn’t really know.

          What has kept Tesla afloat is the enormous run-up in its stock price. The company has used that to good effect, using its increased value to borrow cash that it could add to its balance sheet and using it to fund operations.

          It also benefited enormously from GM’s bankruptcy, which proved to an enormous stroke of good luck for Tesla. Sometimes, it pays to be lucky.

        • 0 avatar
          Zykotec

          Since almost half the Teslas end up here in Norway, I guess our ‘subsidies’ should be counted too. Over here you can buy the Tesla completely tax-free. On all ICE cars there is tax on weight, engine displacement, and horsepower + 25% VAT.
          A comparable 5 series or E-class would cost twice as much, meaning Teslas marketshare here would really not exist without incentives.
          On top of that you get to go free through tollroads (which surround our capital Oslo where most of the cars are sold), and use buslanes, and get free parking and charging many places.
          In total you end up with a massively powerful (by our standards) luxury car that will cost you less to won each month than a normal family midsize car…

          • 0 avatar
            Pch101

            That isn’t a subsidy for the OEM. You may as well claim that suppliers of seat belts are subsidized because seat belts are required by law, which creates a market for compliance.

            Norway provides consumers with substantial incentives to buy EVs. Some automakers take advantage of this but most don’t.

            Tesla’s failure to make a profit tells the story. Most automakers have minimized their participation in the EV market because the EVs lose money; they are only building them to the extent necessary to comply with other regulations. Tesla has bet on the EV market and has not been able to turn a profit, at least not thus far.

            The Norwegians might be better off if they just put the subsidies into mass transit. Let people ride public transport for free, and give them some kind of bonus for using it a lot.

        • 0 avatar
          thelaine

          SCE. Tesla makes money on every carbon credit sold. They lose money on everything else. Companies who are forced to purchase carbon credits then pass that tax onto their customers. No subsidies/mandates, no Tesla.

          • 0 avatar
            Pch101

            You don’t grasp the credit concept at all (which doesn’t surprise me, but whatever.)

            To generate EV credits, one must produce electric vehicles.

            Producing EVs loses money for every OEM that does it.

            There is a market for Tesla’s EV credits because the other OEMs don’t want to produce enough EVs to avoid purchasing credits. They don’t produce those credits because the cars that produce credits would lose money.

            Nobody generates a profit selling EV credits. Their pricing reflects the fact that many OEMs would prefer to spend money on credits than on making money-losing electric cars, which would suggest that the credits cost less than those losses.

            This kind of credit is similar to the cap and trade concept. It is essentially a fine imposed on automakers for not producing enough EVs, except that the amount of the fine is determined by the market.

            If EVs were profitable, the credits would have no value, since every OEM would be producing enough EVs to avoid buying the credits. Instead, Tesla and Nissan are stuck absorbing the brunt of the losses for the rest of the auto industry.

          • 0 avatar
            thelaine

            You are a condescending prick, which doesn’t surprise me, but whatever.

            It is a money transfer to Tesla from other manufacturers which allows Tesla to exist.

          • 0 avatar
            Pch101

            Repeating your lack of knowledge only confirms your lack of knowledge. Wearing your ignorance on your sleeve is a character flaw, not a point of pride.

            Producing EV credits is a loss generator. There is a good reason why major profitable automakers are not rushing to get into the EV credit production business. This shouldn’t be hard to understand.

            What has kept Tesla afloat is its high stock price. The resulting debt capacity allowed Tesla to lever up with new debt and convertible bonds.

          • 0 avatar
            thelaine

            Others disagree, Claven.

            http://www.wsj.com/articles/the-tesla-paradox-1423786534

          • 0 avatar
            Pch101

            Hiding behind Rupert Murdoch’s skirt doesn’t really help your cause.

            Explain to the audience: If the EV credit market is so fantastic, then why aren’t major automakers such as Toyota rushing to jump into the EV credit business?

          • 0 avatar
            thelaine

            Ignore every source you do not approve and make it into a personal attack. Typical. It is a Wall Street Journal writer analyzing Tesla’s business model. You respond with an attack on Rupert Murdock because you think you are smarter than the writer and Murdock. You are a spoiled little child.

          • 0 avatar
            Pch101

            Once again: If the EV credit market is so fantastic, then why aren’t major automakers such as Toyota rushing to jump into the EV credit business?

            (To make this easy for you, I’m sure that you have no idea what the answer is, even though I have already provided it, so the question can remain strictly rhetorical.)

          • 0 avatar
            thelaine

            Here you go, dkhead:

            Business World Columnist Holman Jenkins Jr. on how Elon Musk’s battery-powered car company is propped up by government subsidies. Photo: Getty Images
            .
            The world loves an optimist, and fast-growing start-ups often lose money as they focus on capital investment. What makes Tesla different is that the bottom line would have been much worse without $86 million in profits from the sale of government emissions credits. A Barclays analyst told the Journal that the fourth-quarter results were “heavily supported” by the credits.

            Because it produces only electric cars, Tesla receives excess “credits” for complying with federal fuel-efficiency standards and state zero-emission vehicle (ZEV) mandates, notably in California. Tesla can then hawk its surplus credits to auto makers that fail to meet the government rules. Last year Tesla made a roughly $150 million killing from selling ZEV credits. That’s up from $130 million in 2013, $32 million in 2012, and $3 million in 2011. All told in 2014 Tesla sold about $216 million in credits, equal to about 7% of its auto sales.

            Those government subsidies come on top of a $7,500 federal tax credit for each electric car sale and state rebates. Nevada and California have also bestowed upward of $1.5 billion in tax breaks on Tesla.

            A Tesla earnings report last year predicted that revenue from credits would “remain low in the future relative to our automotive sales” though it would “pursue opportunities to monetize ZEV credits.” Such opportunities will abound as California’s ZEV and federal fuel-efficiency mandates grow more stringent. More states are also adopting electric-car mandates.

            Capitalism needs visionaries, but its reputation suffers when companies worth billions soak middle-class taxpayers for profits. Turn off the taxpayer tap, Mr. Musk. It would earn you more friends for the long haul.

          • 0 avatar
            Pch101

            One thing that separates the smart folks from the non-so-smart is that the smart people realize that another person’s opinion is just that: an opinion. Finding another person who says what you want to hear only shows that (a) there is one other guy who agrees with you and (b) you are too weak-minded to defend your own argument.

            Again: If the EV credit market is so fantastic, then why aren’t major automakers such as Toyota rushing to jump into the EV credit business?

            I don’t expect you to answer that question, given your track record around here. But your inability to answer it shows that you don’t understand the issue at all.

          • 0 avatar
            thelaine

            Have another beer Cliff.

          • 0 avatar
            Pch101

            I’m just shocked that Toyota doesn’t follow your advice and leap into the EV credit business. If a genius like you can see the profit potential, then why can’t they?

          • 0 avatar
            CJinSD

            Legitimate car companies aren’t jumping into the credit scam because the deck isn’t being stacked in their favor. As a crony of the current regime, Elon isn’t about to be surprised by a change in CA or Obama policy when executing his business plans. Toyota would face that risk, just as Tesla now is in Norway.

          • 0 avatar
            Pch101

            I’ve already answered the question: The only way to produce EV credits in large quantities is to make a money-losing product. Producing losses on purpose doesn’t make a lot of sense.

      • 0 avatar
        mcs

        Which auto companies don’t owe their existence to government subsidies? Seriously, has anyone put together a list?

      • 0 avatar
        thelaine

        Norm!!!

        A Barclays analyst told the Journal that the fourth-quarter results were “heavily supported” by the credits.

        Because it produces only electric cars, Tesla receives excess “credits” for complying with federal fuel-efficiency standards and state zero-emission vehicle (ZEV) mandates, notably in California. Tesla can then hawk its surplus credits to auto makers that fail to meet the government rules. Last year Tesla made a roughly $150 million killing from selling ZEV credits. That’s up from $130 million in 2013, $32 million in 2012, and $3 million in 2011. All told in 2014 Tesla sold about $216 million in credits, equal to about 7% of its auto sales.

        Those government subsidies come on top of a $7,500 federal tax credit for each electric car sale and state rebates. Nevada and California have also bestowed upward of $1.5 billion in tax breaks on Tesla.

    • 0 avatar
      healthy skeptic

      @Pch101

      Tesla’s lack of profitability to date is somewhat caused by the amounts of money they spend on R&D, and expanding their company.

      Don’t know for sure, but if they leveled off and just concentration on making their current car(s), they’d probably be a lot closer.

      • 0 avatar
        Pch101

        You’ve got this backwards.

        R&D is not an option in the auto industry, it’s mandatory.

        Furthermore, it’s a killer and exactly one of the basic reasons why profitable independent automaking is next to impossible. Even major automakers make efforts to find ways to make their R&D spending efficient because of the nature of this problem.

        As I’m sure that I’ve noted to you before, ***Tesla spends too little on R&D.***

        Let me repeat that again, in case you missed it: ***Tesla spends too little on R&D.***

        If Tesla had a proper R&D budget, then it would be generating even greater losses. Deferring investment is understandable over the short run for a marginal enterprise that is losing money, but it is not sustainable over the long run.

        • 0 avatar
          28-Cars-Later

          So what’s the endgame for Tesla if they are coasting on R&D, buyout from someone with deeper pockets?

          • 0 avatar
            Pch101

            The short answer is that Tesla needs a lot more demand coupled with cheaper batteries and/or some other outlet that could generate profit.

            Perhaps the “Gigafactory” can make the company profitable. The primary benefit of the cars may ultimately be the brand value that can be provided for the batteries, rather than the cars themselves.

  • avatar
    jimbob457

    On the surface Norway in 2015 looks like a natural for subsidizing EV’s even with today’s $60 oil. Norway represents an extreme situation. Still the devil is in the details, so when oil falls from $110 to $60 a review seems called for.

    The obvious lesson is that the recent decline in oil prices is not a good omen for EV subsidies anywhere.

    In Norway, the key is the marginal revenue available from Norwegian electricity sales (generated from hydro) at 4am in the morning. With modern time-of-day metering Norway may be looking at almost free fuel for EV’s. So, oil export prices fall by 40% – no biggie.

    • 0 avatar
      stingray65

      That is another EV myth – that EV’s get recharged only at night when the grid is under-utilized. My employer parking lot has several EV recharging stations and they are 100% utilized from 7AM to 6PM every day by people worried about whether they will get home without some more fresh juice in the tanks.

      • 0 avatar
        jimbob457

        I did not mean to imply that all EV recharging takes place at 4am, only that with appropriate price incentives and time-of-day metering a significant portion might. The situation in Norway is a very extreme case with over 90% of their electric generation coming from hydro.

        Without knowing all the details, I can’t comment whether Norway’s EV subsidies remain (or ever were) a good idea. I do know that situations change over time – today’s “no brainer” can easily evolve into tomorrow’s bad idea, then disappear.

        For a few years in the 1970’s and early 1980’s the only possible local source of motor fuel for New Zealand was the offshore Maui gas field. The New Zealand government created subsidies for CNG fueled vehicles. For a number of years their sales were about 1/3 of the market. Then the situation changed, the subsidies were withdrawn, and sales of CNG-powered vehicles fell to near zero.

  • avatar
    Mattias

    It’s the same effect we saw with the Prius in California 10 yrs ago. The lanes become clogged and then the people who the lane was originally set out for become clogged. Despite this, Norwegians are beginning to understand what has gone wrong because the Mercedes C and the Ford Mondeo have been major successes in recent moment and the Tesla has all but faded. The bus company wants the benefits scrapped. Many electric cars were bought as a daily driver as opposed to the main/family vehicle and replaced Fiestas, Fits, Corsas, Polos, Clios and Yarises (anything is better than a Yaris tho)

  • avatar
    healthy skeptic

    Figure than for every EV sold, Norway is able to export a little more oil, even if some of the oil savings comes from reduced mass transit, which is less saved of course. So if every EV gains a bit of oil revenue for Norway. It would at least offset some of the loss from incentive.


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