Norway plans to gradually eliminate electric car subsidies within two years, and popular models like the Tesla Model Y will face increased taxes.

The Norwegian government announced on Wednesday plans to gradually phase out major subsidies for electric cars over the next two years, leading to a cost increase of several thousand dollars for new vehicles such as Tesla Model Y. According to the latest registration data, pure electric cars in Norway accounted for 98.3% of new car sales last month, reaching a historic high. This aligns with the country's long-term goal of completely phasing out gasoline and diesel internal combustion engine vehicles by 2025. Finance Minister Jan Tore Sanner said in a statement, "We have set a target that by 2025, all new passenger cars should be electrified, and we can say that this target has been largely achieved. Therefore, it is now time to gradually phase out these incentives." For years, Norway, with its abundant oil resources, has exempted electric cars from all taxes that apply to internal combustion engine models to accelerate the transition to electric vehicles. However, this policy has resulted in the country's fiscal revenue decreasing by billions of dollars each year. Starting in 2023, Norway will begin to levy a 25% value-added tax on vehicles priced over 500,000 kroner (approximately $49,508), mainly affecting high-end models such as BMW iX, Tesla Model X, and Porsche Taycan, while mass-market models will be largely unaffected. Tesla's official website shows that currently, only the most expensive high-performance all-wheel-drive version of the Model Y is subject to the value-added tax. According to the 2026 budget proposal, Norway plans to reduce the tax-exempt amount for electric cars to 300,000 kroner and start levying value-added tax on all versions of the Model Y and mid-range models such as the Volkswagen ID.4. If approved by parliament, the VAT exemption will be completely eliminated starting in 2027, and all electric cars will be taxed at the standard rate. At the same time, the government plans to increase the first-time registration tax on fuel cars to maintain the overall incentive advantage for electric vehicles. However, the Norwegian Electric Vehicle Association expressed concerns about this adjustment, believing it is "too hasty," and called for a more gradual approach to reducing tax incentives. The head of the association, Christina Bu, said in a statement, "I am worried that sudden significant changes will cause more people to switch back to fuel cars, which I believe no one wants to see." The association pointed out that currently, seven out of ten vehicles on Norwegian roads are still fuel cars. Politically, the government is a minority ruling party and needs to negotiate budget proposals with four political parties in parliament. Economically, taking the Model Y as an example - this model has been the best-selling passenger car in Norway for the past three years, with the cheapest version starting at 422,000 kroner. If the 25% value-added tax is calculated on the portion exceeding 300,000 kroner, a tax payment of approximately 30,500 kroner will be required; if the exemption is completely eliminated the following year, the cost will increase by approximately 75,000 kroner. In terms of finance, the government proposes to increase spending from the Sovereign Wealth Fund from 534.2 billion kroner in 2025 to 579.4 billion kroner in 2026 to support public expenditure. At the same time, they have raised economic growth forecasts excluding the oil industry to 2.0% in 2025 and 2.1% in 2026, and predict a core inflation rate of 2.9% in 2025, which will decrease to 2.5% in 2026.