Here’s an overview of Norway’s plan to phase out electric-vehicle (EV) tax exemptions by 2027 — and what it could mean politically, economically, and for EV adoption.
Background: Norway’s EV leadership via incentives
Norway has long been a poster child for rapid EV adoption. Its success has hinged on generous incentives: EVs have historically been exempt from import duties, registration taxes, and a full 25 % value-added tax (VAT), making them far cheaper relative to internal combustion vehicles.
This “carrot and stick” approach also included high taxes on petrol and diesel, making fossil-fuel vehicles expensive to buy and run. The strategy worked: by 2024, 88.9 % of new cars sold in Norway were fully electric.
However, this shift has also eroded the tax base. As fewer fossil cars are sold, the revenue from vehicle taxes shrinks. Norway now faces the paradox of “running out of gas-guzzling cars to tax.”
The New Plan: Phasing Out EV Tax Exemptions by 2027
In October 2025, the Norwegian government unveiled a proposal to remove the VAT exemption for all EVs by 2027, as part of its 2026 budget planning.
Key Milestones in the Phase-out
- 2026: Lowering the exemption threshold
- The government plans to cut the VAT-exemption cap from 500,000 Norwegian kroner to 300,000 kroner.
- This means mid-range EVs (e.g., popular models like Tesla Model Y or VW ID.4) that currently benefit fully may face VAT charges.
- 2027: Complete removal
- All VAT exemptions for EVs would be abolished, subject to parliamentary approval.
- That means EV buyers would pay the full 25 % VAT (on the taxable base) just like buyers of conventional vehicles.
- Other countermeasures
- The government proposes increasing the one-time registration levy (purchase tax) on fossil fuel cars to maintain relative incentives for EVs.
- In the 2026 budget, it also forecasts higher spending from the sovereign wealth fund to shore up public finances.
If passed, the plan would reduce the annual tax expenditure (the cost of foregone VAT revenue) that the state now shoulders. The exemption currently costs the government tens of billions of kroner each year.
Rationale & Justifications
- Mission achieved: The government argues that Norway has met its core goal — making nearly all new cars electric — so blanket subsidies are no longer needed. “We have had a goal that all new passenger cars should be electric by 2025 … and the time is ripe to phase out the benefits,” said Finance Minister Jens Stoltenberg.
- Fiscal sustainability: With declining tax revenue from petrol and diesel vehicles, the state is under pressure to find new sources of revenue. The EV tax exemption is now seen as a large ongoing subsidy, difficult to sustain.
- Market maturity: The EV market in Norway is mature; adoption rates are extremely high. The government seems to believe that EVs are now competitive enough to survive without heavy fiscal support.
Criticisms, Risks & Reactions
- Harsh timing: The Norwegian EV Association flagged the proposed changes as too abrupt, cautioning that a sudden tax jump could discourage EV purchases and briefly reverse progress.
- Cost shock for buyers: For many consumers, the removal of VAT could add significant costs, on the order of tens of thousands of kroner, on typical EVs.
- Political negotiation risk: Norway’s current government is a minority. The proposal must be negotiated with multiple parties in Parliament, and opposition from pro-EV groups or regional interests could dilute or delay provisions.
- Risk to momentum: Some analysts worry that cutting incentives too early risks stalling consumer enthusiasm, especially among late adopters or price-sensitive buyers.
Implications & Broader Lessons
- Signal effect: The move signals a transition from aggressive subsidy to “normalization” of EVs — treating them more like conventional cars in tax policy.
- Comparative models: Other countries observing Norway may see this as a benchmark: that EV subsidies are transitional policies, not permanent fixtures.
- Need for infrastructure & cost dynamics: Once subsidies taper, other cost factors (battery costs, energy prices, charging infrastructure, maintenance) will play a larger role in the competitiveness of EVs. Norway may need to lean more on non-fiscal incentives or regulation.
- Equity concerns: Wealthier buyers may weather the price increases, but lower-income buyers or those in less electrified regions could face steeper barriers.