Norway – An Electric Car Market Pioneer

Who would have thought that Norway would be a pioneer of the electric car market! Most people would consider Norway to be a cold, high-taxing country with great scenic roads and very large animals!

Norway like other countries has had an interesting relationship with cars. In the early days, several companies wanted to take advantage of a burgeoning market only to disappear as others grew faster and with economies of scale put the local manufacturers out of business. Norway isn’t exactly on a logistics pathway like the Silk Road or in the heart of a large population like France or Germany.

However, here we are in 2017 and over 100,000 electric cars have been sold in the country! That is quite impressive considering the size of the market and population. It is even more impressive when you consider the weather conditions that the cars have to deal with – you would think that the vehicle would use more power to keep the car warm and using more onboard devices.

How did Norway get so focused on electric cars? Well timing is always to be considered. Back in the 1990s, the Government saw that this fuel source would become more relevant and importantly to help buyers be more “green”, they introduced tax benefits for the purchase of an electric vehicle. In the last few years with increased development and reliability of batteries and the better designs of cars in general, the market has seen a huge increase in sales – estimates now suggest that 5% of all cars on the road are electric.

The number of electric cars will increase a lot more now that the technology has been improved. Most of the desire to buy comes from the Government who are starting to put higher tariffs on cars based on their emissions (high emissions equals a high tariff) and also some other more useful offers. These include being allowed to use bus lanes for faster travel, free parking in cities, free car ferry rides and even free tolls on some roads. There is even a push to build a reliable charging network in public and store car parks. When all this is added up, the cost over the life of the car starts to look much cheaper (to buy and run).

The country’s electricity is generated by StatKraft, the Government owned power company. 99% of the power is generated from renewable sources, in other words: wind, water and bio. For Norway alone that equates to a power output of 45.5TWh or 45 million mega-watts per hour!

It is also interesting that Norway is actually sliding down the Environmental Performance Index despite increasing their score with each test. In 2012 they were 3rd, 2014 8th and 2016 they had dropped to 17th. Other countries are performing better on the scale. That is not to say that the Norwegians are heavy polluters though. However …

The other important Government owned business is Statoil – and this business pumps 2.5M barrels of oil per day from 42 fields in Norwegian territories. This makes Norway one of the top oil producers outside of OPEC. So a huge amount of revenue flows into Government coffers and combined with a high effective tax percentage rate in the 40s means that the Government can afford to give back to buyers of electric cars.

So this is the interesting bit. The energy used by the vehicle is the greenest possible yet the incentives to buy the cars comes from the opposite end of the spectrum: carbon fuels! With the coffers bulging with cash, the Government can easily give something back to high taxed consumers. We shouldn’t look at Norway as a good example of creating a market for electric cars – it is based on the fact that they can use oil and energy revenues to prop up the market.

Then when the oil revenues dry up, so will the incentives. So lets hope that the Norwegians keep buying electric cars because they are helping to reduce the economies of scale for Tesla, Nissan and the other manufacturers which then will help everyone else!