A new era for electric vehicle policy in Norway
For decades, Norway has been at the forefront of the shift to electric cars. With just over five million people, the country has become an example of how sustainable transport policy can transform a market. Electric cars now make up the majority of new vehicle sales in Norway – 95% of every new private car sold in 2025 was an electric car.
This success, however, has also prompted a policy shift: the end of the era of generous EV subsidies.
The golden age of Norwegian EV policy
Successive Norwegian governments have implemented a comprehensive package of incentives to accelerate the shift from petrol and diesel to electric. The key measure was a full exemption from the Value Added Tax, effectively cutting 25% off the purchase price. In addition, electric vehicles have been exempted from Norway’s one-off registration tax (i.e. a tax charged when a car is registered for the first time), a substantial cost element for petrol and diesel cars. Combined with exemptions from road tolls, free municipal parking, access to bus lanes, and reduced ferry fares, this created strong financial incentives to choose electric. These incentives have also operated alongside consistently high taxes on fossil fuels, adding roughly NOK 6.50 per litre for diesel and NOK 7.50 per litre for petrol at the pump.
By 2022, electric vehicles accounted for nearly 80% of all new car sales, higher than in any other country. Electric cars went from a niche choice to the mainstream option for most buyers.
A policy turning point
Success, however, has also pushed the policy in a new direction. In 2023, the Norwegian government introduced the most significant adjustment to EV policy in years by partly reintroducing VAT on electric vehicles. Under the new rules, the 25% VAT applied to the portion of an electric car's price exceeding NOK 500,000 (i.e. roughly EUR 43,000). From 1 January 2026, the VAT-free threshold was reduced to NOK 300,000 (approximately EUR 26,500). The government has also signalled that it wants to lower the threshold further to NOK 150,000 in 2027 and remove the threshold altogether in 2028, effectively applying full VAT.
The reasoning is simple. Now that electric vehicles have become the norm, the original justification for subsidies has weakened. Why should the state subsidise purchases consumers are already making? Additionally, maintaining the VAT exemption came at a cost for the Norwegian society, reducing funds available towards public services.
There is also a question of fairness. Critics pointed out that the biggest gains often went to well-off buyers choosing premium vehicles. According to critics, the policy designed to accelerate the green transition had become a subsidy for luxury purchases. By lowering the threshold, the government retains incentives for more modestly priced vehicles while asking buyers of higher-priced models to contribute more.
Industry reactions and market adjustments
Early data from 2026 reveals a marked shift in the Norwegian electric vehicle market. New car registrations in January 2026 were described as "tepid" following a rush of purchases in December 2025, with some sources reporting dramatic declines in sales of certain EV models compared to the same period the previous year.
The primary driver behind this downturn is likely the lower VAT-free threshold. This change has resulted in price increases of NOK 10,000 to NOK 25,000 for many models. The decline, however, must also be viewed in context. The year 2025 recorded historic high car sales in Norway. Nearly all new vehicles sold were electric, which created an artificially elevated baseline.
Despite the drop in total volume, the share of electric vehicles in new car sales in Norway remains remarkably high – around 94% in January 2026.
Looking ahead
As Norway navigates this transition, many other countries watch with interest. Other countries are at various stages of their own electric vehicle journeys, and many still rely on subsidies. Norway’s experience shows both what subsidies can achieve and the trade-offs that come with them.
The main takeaway is that subsidies can work, but they are hard to justify indefinitely. Norway's programme was highly effective in shifting car sales away from fossil fuels and towards electricity. At some point, however, subsidies must be scaled back, and the market must carry more of the load. The difficulty is doing that without slowing the transition or cooling demand.
Important questions also remain about the future. As fossil fuel cars disappear, the tax base built around them is also disappearing.
A beginning, not an end
For Norwegian motorists contemplating their next purchase, the message is nuanced. Electric vehicles are still a strong option, supported by an extensive charging infrastructure and a mature second-hand market. There is still a financial advantage, even if it is smaller than it used to be. Notably, EVs remain exempt from Norway’s one-off vehicle registration tax and are not subject to fuel taxes. What has changed is the expectation that the state will keep subsidising the shift indefinitely.
The partial return of VAT on electric vehicles does not signal the end of Norway’s climate ambition. Instead, it reflects a more mature EV market. Having demonstrated that electric vehicles can succeed in a challenging Nordic climate, Norway is now showing that the EV market can stand on it own merits in something approaching normal market conditions.
Norway's EV transition is not over, but has simply entered a new phase.
