Norway will phase out its main electric vehicle subsidies over the next two years, the government said on Wednesday, adding thousands of dollars to the price of popular models such as Tesla’s Model Y. The decision marks a shift from the country’s long-standing policy of heavy EV incentives as it nears its goal of ending petrol and diesel car sales by 2025.
Fully electric vehicles accounted for a record 98.3% of new car registrations in September, reflecting Norway’s near-complete transition to zero-emission transport. For years, the oil-rich nation exempted EVs from most taxes applied to combustion-engine vehicles, costing the state billions of dollars annually in lost revenue.
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In 2023, the government began scaling back incentives, introducing a 25% value-added tax (VAT) on the portion of an EV’s price above 500,000 crowns ($49,508), primarily affecting premium models such as the BMW iX, Tesla Model X, and Porsche Taycan. Under the new plan, the VAT exemption threshold will be lowered to 300,000 crowns in 2026, extending the tax to mid-market models including the Tesla Model Y and Volkswagen ID.4.
By 2027, the government intends to eliminate all VAT exemptions for EVs, subjecting every new electric car to the full 25% rate, pending parliamentary approval. To maintain incentives for buyers to choose electric vehicles, the one-time registration levy for fossil fuel cars will be increased.
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“We have had a goal that all new passenger cars should be electric by 2025, and with an electric car share of 95% this year, we can say that the goal has been achieved in practice,” Finance Minister Jens Stoltenberg said. “Therefore, the time is ripe to phase out the benefits.”
The move comes as part of the government’s 2026 budget proposal, which also includes an increase in spending from the sovereign wealth fund to 579.4 billion crowns ($52.6 billion), up from 534.2 billion in 2025, to support public expenditures. The Finance Ministry projects non-oil economic growth of 2.0% in 2025 and 2.1% in 2026, with core inflation expected to ease from 2.9% this year to 2.5% next year.
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The Model Y, Norway’s top-selling car for three consecutive years, currently starts at 422,000 crowns. Under the revised tax scheme, it would incur about 30,500 crowns in VAT in 2026, and an additional 75,000 crowns once the exemption is fully removed in 2027.
Source: Reuters