Norway Withdraws Electric Vehicle Subsidies Amid Market Saturation

The Norwegian government has announced a proposal to gradually remove the Value Added Tax (VAT) exemption on the purchase of electric vehicles.

This decision reflects the maturity of the Norwegian automotive market, where electrification goals are deemed nearly achieved, with the vast majority of new car registrations already being electric models.

Sales figures support the Norwegian government's measure: by the end of September, the share of electric vehicles in Norway stood at 95% of the total market. In fact, in the first nine months of the year, 107,608 electric vehicles were registered, marking a 23.5% increase compared to the same period last year.

In September alone, a new record was set with 14,084 new electric vehicle registrations, representing 98.3% of the total.

The Norwegian government, through the Ministry of Finance, argues that this subsidy for electric vehicle purchases, in place for two decades, has become a general subsidy program costing 17.5 billion Norwegian kroner (approximately 1.492 billion euros) to the public treasury.

Therefore, the initial proposal for 2026 is to reduce the VAT threshold for electric vehicles from 500,000 to 300,000 Norwegian kroner (approximately 42,659 to 25,593 million), and subsequently eliminate the exemption entirely from 2027.

Norway's Finance Minister, Jens Stoltenberg, justified the measure by stating that this gradual removal of benefits will allow for the reduction of other taxes and levies, in line with the government's fiscal commitment.

However, this proposal has raised concerns in the sector. The Norwegian Public Roads Administration (OFV) has pointed out that uncertainty over the final price of new cars could complicate the automotive industry's situation, and the agency's director, Geir Inge Stokke, warned of the risk that electric vehicle development could slow or halt.

Meanwhile, the Norwegian Electric Vehicle Association has strongly opposed the gradual VAT increase, calling the measure "irresponsible" and "terribly bad" due to the government's haste. The association's secretary general, Christina Bu, lamented that the tax introduction was not more gradual and announced in advance, expressing fear of a possible return to internal combustion cars, jeopardizing the historic success of the electric vehicle market in the country.

On the opposite side of the budgetary and climate balance, the Norwegian government has also proposed increasing carbon taxes by 14% in 2026, as part of its plan to raise the overall tax level to 2,400 Norwegian kroner (about 204 euros per tonne of CO2 by 2030).

The increase will continue at the same pace after 2030, reaching a tax level of about 290 euros per tonne of CO2 by 2035. Minister Stoltenberg stated that this measure reinforces the use of carbon taxes as a key instrument for reducing the country's greenhouse gas emissions.