Norway, long regarded as a global leader in electric vehicle adoption, has announced plans to eliminate its main EV subsidy over the next two years, marking a major policy shift after nearly a decade of aggressive electrification incentives.
The change, revealed in the government’s budget proposal, will add thousands of dollars to the price of popular models such as Tesla’s Model Y — currently the country’s best-selling car.
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Goal achieved: mass electrification
Official registration data show fully electric vehicles accounted for an unprecedented 98.3% of all new cars sold in Norway last month, effectively fulfilling the nation’s long-standing target to end the sale of petrol and diesel passenger cars by 2025.
“We have had a goal that all new passenger cars should be electric by 2025, and we can now say that the goal has been achieved,” Finance Minister Jens Stoltenberg said. “Therefore, the time is ripe to phase out the benefits.”
Norway has used broad tax exemptions — covering import duties, registration taxes and VAT — to accelerate EV uptake. These incentives have cost the state billions of crowns in lost revenue over the years.
In 2023 the government already introduced a partial VAT on the portion of an EV’s price above 500,000 Norwegian crowns, targeting high-end models while keeping mass-market cars shielded. Under the new proposal, the VAT exemption threshold will be lowered to 300,000 crowns in 2026, exposing mid-range EVs such as the Tesla Model Y and Volkswagen ID.4 to VAT. By 2027 the remaining VAT exemptions would be removed entirely, subject to parliamentary approval.
Industry and lobby group reactions
The Norwegian EV Association described the plan as “hasty” and called for a more gradual phase-out. Christina Bu, the association’s head, warned that rapid changes risked pushing some buyers back toward fossil-fuel vehicles — an outcome the country has worked for years to avoid.
Despite the record share of new EVs, the association notes that the majority of cars on Norwegian roads are still fossil-fuelled, underscoring the importance of careful policy design during the transition.
Keeping incentives balanced
To maintain incentives for electric cars, the government also proposed raising the one-time registration levy on petrol and diesel vehicles. This measure aims to keep the relative attractiveness of EVs even as direct tax breaks are scaled back.
As an example, a Tesla Model Y with a list price of roughly 422,000 crowns could face an additional VAT of about 30,500 crowns if the exemption threshold is reduced to 300,000. If VAT exemptions are removed entirely in 2027, that same car could become nearly 75,000 crowns more expensive.
The government also proposed increasing withdrawals from Norway’s sovereign wealth fund to 579.4 billion crowns in 2026, up from a revised 534.2 billion in 2025, to help cover public spending. The Finance Ministry raised its non-oil growth forecasts and expects core inflation to ease slightly in 2026.
The budget proposal, put forward by a minority government, will now be negotiated in parliament and may be amended before any changes take effect.
