How Norway Accidentally Became the World Leader in Electric Vehicles
While just a few percent of vehicles sold globally are electric, 80% of those in Norway are
Electric vehicles are on the rise. Electric cars were less than 1% but total sales in 2016, but have risen to over 4% in 2020. Bloomberg New Energy Finance estimates that by 2040, electric vehicles (EVs) will represent the majority of new vehicles sold. Yet, in one unlikely Scandinavian country electric vehicles already dominate the market.
Norway has become the canary in the coal mine for electric vehicle adoption. In January, 80% of vehicles sold plugged in and over half were all-electric. Yet, Norway seems like an unlikely candidate to lead in this sector. Aside from being one of the world’s largest oil producers, Norway is a relatively cold (where electric cars lose some of their range) and lacks the population density of many other European countries.
Sales of electric vehicles are spurred by a laundry list of incentives designed to encourage adoption. This includes an exemption from the hefty 25% VAT, an exemption from the annual road tax, and access to bus lanes. Some incentives have been rolled back in previous years, but electric car owners still often see reduced fees from parking and toll roads.
But while the modern electric cars first popped up around 2010, Norwegian incentives were in place as early as 1990. The exemption from the VAT — the largest financial incentive in place — was introduced in 2001. The incentives that ultimately led to the EV surge in Norway were originally installed as part of a failed attempt to rescue an ailing domestic industry.
While many people think that electric vehicles only sprung up in the last decade, their history is actually long and complicated. The very first electric cars were made in the 1830s, and in the early days of the automobile industry they out-sold gas vehicles. The invention of the Model T Ford combined with the discovery of plentiful oil reserves gave gas vehicles the edge, and electric vehicles faded into obscurity by 1935.
In the intervening decades, there were sporadic efforts to revive the electric car, including occasional interest from major automakers like General Motors and AMC (usually when gas prices started to become too high for comfort). However, none of the models produced made it very far, so electric cars remained out of the public view.
In 1988, a Danish businessperson founded Kewet (later renamed the Buddy), a company intent on producing small electric vehicles. This was followed by a company named Pivco (later renamed TH!NK) in 1991. Unfortunately, the cars looked nothing like those on the road today. A former Norwegian Minister of Transportation described them as “tiny, kind of plastic cars seating two people, where you would freeze to death during the wintertime”.
The Buddy, successor to Kewet, could travel between 20 to 60 kilometers on a charge and could only reach a top speed of 80 km/h. The TH!NK City had mildly better specs, but came at a hefty price-tag of $38,000 USD.
At the time, no major automaker produced an electric car of their own. To support the young industry, the Norwegian government followed with a steady stream of new incentives to encourage consumers to try the new vehicles. The incentives were never intended to be permanent, only to help the industry gain lift-off. The Norwegian parliament decided that the tax break would end when sales reached 50,000 or in 2017 — whatever happened first.
Despite generous incentives, the cars failed to find success. Buddy sold just 1,500 units and about 1,000 in Norway alone. TH!NK did only slightly better, selling about 2,500 units (including 1,120 units in Norway). Both companies declared bankruptcy in 2011, just as mainstream automakers began to produce electric cars of their own. Tesla’s first mass-produced car — the Model S — would enter production a year later with a range of over 400 km on the top end variant.
Despite the demise of the Norwegian electric vehicle industry, the government left the incentives in place. The large incentives quickly made Norway a fast-growing market for early electric cars. As EVs became popular, the government decided to keep most of the incentives in place beyond their original timeline. Far past the original goal of 50,000 units, Norwegian roads boasted nearly 500,000 electric vehicles at the end of 2020 (350,000 of which were all-electric).The government even introduced some new incentives, including efforts to expand charging infrastructure across all primary highways.
Today, Norway has no substantial domestic industry for EVs. Yet, they’ve become the world leader in EV adoption. 80% of new vehicles sold are electric, and an impressive 17% of cars are on the road now plug-in. The government says that petrol car sales will be banned in 2025 — and given their current progress, Norway seems well in line to be the first country to eliminate gas-powered vehicles on their roads.
