Norway plans to gradually eliminate electric vehicle subsidies within two years, and Tesla Model Y and other popular models will face tax increases

According to the Zhitong Finance APP, the Norwegian government announced on Wednesday plans to gradually eliminate major subsidies for electric vehicles over the next two years, a move that will increase the cost of new cars such as the Tesla Model Y by thousands of dollars. According to the latest registration data, pure electric vehicles accounted for 98.3% of new car sales in Norway last month, a record high, which aligns closely with the country's long-term goal of completely phasing out gasoline and diesel internal combustion engine vehicles by 2025.

Finance Minister Jens Stoltenberg stated in a statement: "We set a goal that by 2025 all new passenger cars should be electrified, and we can say that this goal has basically been achieved. Therefore, it is now time to gradually eliminate these incentives."

For many years, oil-rich Norway has exempted electric vehicles from all taxes applicable to internal combustion engine models to accelerate the transition in transportation, but this policy has resulted in a loss of tens of billions of dollars in national revenue each year. Starting in 2023, Norway began imposing a 25% value-added tax on the portion of vehicles priced over 500,000 kroner (approximately $49,508), primarily affecting high-end models such as the BMW iX, Tesla Model X, and Porsche Taycan, while mainstream models are 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 VAT.

According to the 2026 budget proposal, Norway plans to lower the tax exemption threshold for electric vehicles to 300,000 kroner and begin imposing VAT on all versions of the Model Y as well as mid-range models like the Volkswagen ID.4. If passed by parliament, the VAT exemption will be completely eliminated starting in 2027, and all electric vehicles will be taxed at the standard rate. Meanwhile, the government plans to increase the first registration tax for fuel vehicles to maintain the overall incentive advantage for electric models.

However, the Norwegian Electric Vehicle Association expressed concerns about this adjustment, deeming it "too hasty," and called for a more gradual approach to reducing tax incentives. The association's leader, Kristina Bu, stated in a statement: "I worry that sudden significant changes will lead more people to choose fuel vehicles again, and I believe no one wants to return to that situation." The association pointed out that currently, 70% of vehicles on Norwegian roads are still fuel vehicles.

On the political front, the government is a minority party and needs to negotiate the budget proposal with four parties in parliament. Economically, taking the Model Y as an example—this model has been Norway's best-selling passenger car for the past three years, with the cheapest version starting at 422,000 kroner. If a 25% VAT is imposed on the portion exceeding 300,000 kroner, approximately 30,500 kroner in taxes would be due; if the exemption is completely eliminated the following year, costs would increase by about 75,000 kroner.

Financially, the government proposed to increase the sovereign wealth fund's expenditure from 534.2 billion kroner in 2025 to 579.4 billion kroner in 2026 to support public spending. At the same time, it raised the economic growth forecast excluding the oil sector to 2.0% for 2025 and 2.1% for 2026, and expects the core inflation rate to be 2.9% in 2025, falling to 2.5% in 2026