Norway, the paradise of electric cars, has hit a wall: the country is not collecting enough revenue. The total number of cars sold in Norway that run on electric technology surpasses 80%. These figures are what European institutions dream of, but they also pose a problem for the Norwegian government.
The push for electric cars in Norway has been marked by strong subsidies for purchasing them, eliminating the Value Added Tax (VAT) for those who buy a car with this technology. In Norway, the VAT is 25%, which has made buying a Toyota Corolla more expensive than a Tesla Model 3. Additionally, Norway imposes a tax based on the CO2 emissions of each vehicle. Of course, the government has stopped collecting this tax with each electric car sold. This double exemption has had a direct impact on the state's finances, resulting in a deficit of more than 1.8 billion euros.
To illustrate, an Audi Q4 e-tron 50 can be purchased in Norway for 38,000 euros, while in Spain, the same car costs 58,000 euros. The difference is much more substantial when considering that the average salary in Norway is 65,935 euros, compared to 28,360 euros in Spain. It is no wonder that car sales in Norway have skyrocketed in the past year.
In November 2022, the ACEA reported a 27.8% increase in sales compared to the same month in 2021. However, sales in the last quarter of the year dropped significantly, with a 13.4% decrease. This is due to the fact that vehicles costing more than 500,000 Norwegian crowns, or almost 48,000 euros, started paying VAT in 2023. Essentially, cars have become a quarter more expensive.
However, this is not the only measure taken to make electric cars contribute to the state's finances. In 2023, cars in Norway are taxed based on weight, with the idea that "heavier means more polluting." However, this tax was not applied to electric cars until recently, albeit to a lesser extent than to combustion engine cars. Currently, electric vehicles with a battery capacity of over 70kWh still have very large batteries, which makes them heavier. For instance, a Mercedes EQS with a weight of over 2,500kg only has a real-world range of around 400 kilometers. The upcoming electric Rolls-Royce will weigh over three tons.
The solution lies in increasing the weight tax, which is the simplest way to penalize heavier electric cars, which are, in practice, less efficient. The plan is to implement a linear tariff, with the first 500kg of weight exempt from the tax. From this minimum, 12.5 Norwegian crowns will be charged per kilogram exceeding the limit, which is around 1.19 euros/kg. For instance, an electric car with a medium weight of 2,000kg would have to pay 1,680 euros in this tax, which would be added to the VAT (25%) if the car's price exceeds 48,000 euros.
This tax would make electric cars less attractive to buyers, but it would also help the government recover some of the lost revenue. However, this could also lead to a decrease in the number of electric cars sold, as they would no longer be as affordable as they once were. For now, electric cars continue to be the most popular technology in Norway, with sales remaining high despite the recent changes.