By on June 2, 2017

2017 Chevrolet Bolt, Image: General Motors

Despite the protestations of many members of the green car crowd, dollars and cents do seem to play a major role in the motivation to purchase an electric or plug-in hybrid vehicle. Right now, EV proponents and domestic automakers are worried the U.S. won’t renew the green car tax credit — a segment-boosting incentive that shaves thousands off the price of a new electric vehicle.

Some would argue if green car buyers are really devoted to the planet’s health, purchase price wouldn’t be an issue (assuming the buyer’s bank balance is sufficient). Individuals being what they are, motivations and circumstances will vary. Still, no one can argue that a tax credit doesn’t sweeten the pot, just as dealer incentives on the hood of a truck help move sluggish inventory.

In Denmark, however, lawmakers have discovered that once-steady sales of EVs will slow to a trickle when green vehicle buyers are treated like regular car buyers. 

Many countries, especially in northern Europe, continue to fling cash or tax breaks at buyers of electric or plug-in vehicles. Norway is famous for this, but it’s hardly alone in the game. The Canadian province of Ontario, for example, will reach into the treasury and hand over $14,000 to anyone looking to buy a Chevrolet Bolt (or a $100,000-plus Tesla). For a jurisdiction with the world’s largest sub-sovereign debt, that’s mighty generous. Some would disagree with the practice.

Denmark’s method of stimulating green car sales involved removing the 180-percent import tax — currently levied on internal combustion vehicles — from the price of an electric vehicle. What a deal, compared to the alternative! However, economics reared its ugly head and, in 2015, the Liberal government of Prime Minister Lars Lokke Rasmussen announced a four-year phase-out of the tax exemptions.

The plan was as follows: 20 percent of the registration tax would return for 2016, 40 percent in 2017, 65 percent in 2018, 90 percent in 2019, and no tax break at all in 2020.

It didn’t take long before the results became clear. Registration of EVs soared in the last quarter of 2015, then plummeted after New Year’s Day, 2016. With just 20 percent of the tax levied on gasoline cars now applied to EVs, first-quarter 2016 sales fell 65 percent compared to the same period a year earlier. Sales for the first half of 2016 fell 80 percent compared to 2015.

The green picture grew even darker as 2017 dawned. Sales of EVs and plug-ins in Denmark fell 60.5 percent in the first quarter of 2017, compared to Q1 2016. Compare that to the European Union average increase of 30 percent over the same period, or the nearly 80 percent rise seen in nearby Sweden (which offers a five-year tax break and a price incentive).

Denmark’s decision to tax the purchase of EVs “completely killed the market,” Laerke Flader, head of the Danish Electric Car Alliance, told Bloomberg. “Price really matters.”

For the powers that be in Copenhagen, 2017’s first-quarter sales only served to confirm what it already knew. While budgetary issues compelled the country to phase out the tax exemption, a screeching panic stop ensued.

“It’s no secret electrical vehicle sales have been below what we expected a year and a half ago,” Tax Minister Karsten Lauritzen said in a late April statement. “The agreed phase-in has turned out to be hard and that likely halted sales.”

Now, the tiny country has postponed the tax plan, at least until 5,000 EVs are sold in the 2016-2018 period. The gradual phase-out should return again in 2019. That year, green car buyers will face a 40-percent registration tax minus a $1,500 reduction, with tax increases increasing until the exemption disappears completely in 2022.

While its taxation practices are exceptional, Denmark’s experience shows that the handover of tax dollars from the government to carbuyer — or fewer tax dollars handed over from the carbuyer to the government — still plays a role in the health of the EV market. It’s no wonder automakers like General Motors are scrambling to lower production costs and increase the range of their electric vehicles.

One day — perhaps sooner than later in the U.S. — EVs will have to compete without assistance from on high. If that does happen, there’d better be an attractive MSRP to lure buyers away from gasoline.

[Image: General Motors]

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30 Comments on “Can EVs Survive Without a Government Check or Tax Break? Not in Denmark...”

  • avatar

    EV manufacturers simply need to manufacture cars that have at least a 500 km range, a charging time of max 5 minutes from a depleted to a full battery, and a price that is competitive with an ICE-powered car. If they can’t even pull that off, then they have no business being in the EV market in the first place.

    • 0 avatar

      You charge your EV at home while you sleep, and you start every day with a full battery.

      Fast-charging is only for road trips. And gas cars, which can’t be refueled at home.

      • 0 avatar

        All those extension cords stretching across the sidewalks will be a serious tripping hazard.

      • 0 avatar

        Charging at home should be an additional option, not a mandatory part of EV ownership. It should be possible to own an EV and fully recharge it within 5 minutes when you’re on the road, and recharging it at home should never be necessary. Remember, not everyone has the option to recharge at home, and using home charging as an excuse for EV manufacturers not to fix their broken charging system (and it *is* broken if it takes more than 5 minutes to fully recharge an EV) is unacceptable.

        • 0 avatar

          You are right that home charging should be an additional option, but don’t forget that for many of us, home charging of an EV is vastly superior to having to take our cars somewhere and wait in line to fuel our vehicles at a gas station. It’s also a broken system that requires us to take time out of our lives to perform ICE related maintenance.

          Manufacturers have in fact improved charging times with new standards and those vehicles and charging systems will be on the market soon. Chargepoint is showing it’s 400kW charging stations (liquid cooled cable). Porsche has the Mission E on the way that can probably charge at 300 to 350kW and they are deploying charging stations to support it.

          So charging times are in fact going to making significant improvements. What defines a tolerable charging time is an individual decision for drivers. I think as charging times and availability improves, you’ll see more people able to make the move to an EV.

  • avatar

    “Some would argue if green car buyers are really devoted to the planet’s health, purchase price wouldn’t be an issue ”

    Or they could build vehicles that stand on their own merit, so that normal people not considering an EV, want to buy the vehicle regardless of the method of propulsion. With the current crop of CUVs and cars, it shouldn’t be hard. Yet??

  • avatar

    There’s something rotten in the state of Denmark…

    • 0 avatar

      And there’s something that’s right about the state of Denmark, as well, such as the decision to remove the EV subsidies. May we just hope and pray that Norway follows suit soon.

  • avatar

    Since the consumers have been trained to expect huge government incentives on EVs, it is going to be very hard for the cars to stand on their own in the marketplace without incentives.

    Government types still fail to realize that EVs are not a good fit for every driver. Whether it is access to charging, the time of charging, range limitations etc, not every driver can conform to the EV lifestyle.

  • avatar

    Here’s the thing:

    “Denmark’s method of stimulating green car sales involved removing the 180-percent import tax”

    There’s probably not a lot of new cars being sold Denmark. If a 180% tax is dropped, I know I’m getting a new car before it comes back.

    I mean, if the 180% tax is dropped on red cars, but not other cars, there are going to be a lot of red cars in Denmark too.

  • avatar

    Tiny correction to the article. The tax is now 150% rather than 180%. Both are of course +25% VAT which has to be added first.

    In other words. Since Dieselgate, tax for new diesel cars has been lowered (180% to 150%) while tax on electric cars have been raised (from 0 to 150%).

  • avatar
    SCE to AUX

    It’s well-established that subsidies enable sales, and fixed-value subsidies favor lower-priced EVs like the Leaf, more than higher-priced EVs like a Model S.

    However, in this case, we’re talking about a *$63,000* import tax being removed from a vehicle if it would normally cost $35,000. OF COURSE it makes a difference.

  • avatar

    We were always sold that these incentives were just a “sweetener” to get electric vehicles off the ground.

    Since we’re all in agreement that electric cars aren’t going anywhere and will continue to be made and improve, what is exactly the justification for these huge subsidies anymore except just plain old corporate welfare?

  • avatar

    Danish schools, hospitals, and infrastructure need funding. Lots of welfare costs for disabled, elderly, children, refugees from Muslim countries, and the renewable energy sector. So it isn’t too much surprise that tax breaks to help the wealthiest part of Danish society buy a new green car turned out to be a lower priority. The only surprise is that Norway continues with their big EV subsidies even though oil revenues are way down and they are having to spend the “rainy day fund” to maintain the welfare state which so far also includes Telsa buyers.

    • 0 avatar

      Their government spent money advertising to Muslims in Syria not to come to Denmark. The sperm count is low in that low country, owing to all the heavy metals in the water table.
      Prime coastal real estate is only sold to white, Danish born.

      The best of them did manage to get Rhinehard Heydrich’s liver with a leather upholstery fragment..

  • avatar

    Now just imagine what would happen if governments ended the tax breaks and subsidies for the fossil fuel industry, and billed them for the wars waged on their behalf…

    • 0 avatar

      The people who block domestic oil production should pay for the foreign wars. Business expense deductions can be eliminated for our most important industry as soon as they’re eliminated for every other field of business. The other ‘subsidies’ oil receives come in the forms of fuel subsidies for farmers and home heating oil subsidies for the poor and elderly. Good luck rolling back the farmers’ long ago bought pork.

    • 0 avatar

      Economies would completely crash as transit companies could no longer afford fuel and every supply chain disintegrated. But boy would you get the last laugh, exposing that economies rely on petroleum subsidies!!

      Imagine the moral high ground you’d get to occupy as society crumbled around your feet.

    • 0 avatar

      “tax breaks and subsidies” for fossil fuel are not that high per unit of sales, it is huge industry. many “subsidies” are tax breaks all big corporations take. Exxon pays higher effective tax rate than GE.

      Also many wars of last 75 years (Afghanistan, Vietnam, Korea) had nothing to do with oil. Not to mention the the left now blames all war on climate change, not oil, get with it.

  • avatar
    Master Baiter

    I visited Denmark in the early 90s. At that time, a Toyota Carolla that sold for $18K in the U.S. sold for $40K due to import tariffs. Tariffs are supposed to help support local manufacturers. How many Danish car manufacturers are there?

    • 0 avatar

      That’s not the only reason for tariffs.

      In Denmark’s case, I believe the intention is to discourage vehicle use while simultaneously helping to reimburse the country for the externalities of vehicle usage.

      • 0 avatar

        The odds of any of that money being specifically used to combat said externalities is approximately zero.

        Taxes should not be used to encourage or discourage behavior.

        • 0 avatar

          “Taxes should not be used to encourage or discourage behavior” he says. I disagree and so does every civilized country in the world.

          Are you thinking the US is any different in that regard? Taxes are structured to encourage Americans to buy homes, donate to charity, send themselves or their kids to college, produce domestic oil, and a million other things.

          Danes are entitled to structure their taxes however they please to encourage whatever behavior they value. It’s their democracy, not yours or mine. Moreover, they actually DO spend tax money both addressing the externalities of pollution and preventing more, by providing exemplary health coverage to every citizen, building bicycle infrastructure, providing outstanding public transportation service, powering the country largely on wind energy, etc.

    • 0 avatar

      There are no Danish auto manufacturers. New car prices in neighbouring Sweden are much lower than in Denmark, though, most likely as an incentive to keep Swedes buying Swedish cars. However, since the Swedish auto industry is now dead and buried (sold to the Chinese, if anyone wondered), and Sweden desperately needs to find money to pay for its recent “population increase”, don’t expect that to last. And I’m sure that environmental issues and “externalities” will be used as excuses there, too.

  • avatar

    I had suspected as much, the demand for EVs is mostly dependent on the amount of subsidy available. Other than the Teslas are any EVs desirable?

    • 0 avatar

      There are several new European EVs that are desirable. The Porsche Mission E with 300 mile+ range and the ability to put 250 miles of range into the car in less than 15 minutes is one. Mercedes, Volvo, and Jaguar have EVs coming.

    • 0 avatar
      SCE to AUX

      As I mentioned above, this article is highlighting an extreme case.

      In the US, the $7500 Federal subsidy on a Tesla Model S reduces its price by less than 10%.

      In the US, the $7500 Federal subsidy reduces the price of a Leaf by 20%.

      In this case, we’re talking about a subsidy that reduces the price of a Leaf by more than 60%. Take that away on any product, and sales will plummet.

      • 0 avatar

        @SCE I’ve heard rumors that Nissan planned for the loss of the $7500 subsidy when they designed and priced the 2018 Leaf. Supposedly it’ll be price competitive with other 200+ mile range EVs that have the subsidy. We’ll see if it’s true in September.

    • 0 avatar

      From what I can tell cdnsfan27, no.

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