Our content editor, Natalie Persoglio, spoke with Guy Haydon, UK managing director of Zaptec, Norway’s leading charge point manufacturer that entered the UK market last year, about possible explanations for the differences (and whether a certain sovereign wealth fund has anything to do with it).
“It goes without saying that Norway is the runaway leader when it comes to electric vehicle (EV) adoption. In March 2022, 86 per cent of all new cars in Norway were battery electric vehicles (BEVs), with the number rising to 92 per cent if you include plug-in hybrid electric vehicles (PHEVs). These are world-leading figures, so, where does the UK stand?
“Well, the UK actually has a similar number of EVs on its roads, around 477,000 compared to Norway’s 470,000. The UK also has more public chargers, around 32,000 to Norway’s 19,000. There’s just one problem, Norway has only one-twelfth of the UK’s population.
“It means that these numbers paint a somewhat damning picture of the UK’s electric transition thus far. While over 15 per cent of Norway’s total car parc is electric, less than 1 per cent of the UK’s parc is. How has Norway been so successful and what can the UK learn from Norway’s EV success?
“The first thought of many is that Norway’s sovereign wealth fund – the result of exploiting oil and gas resources – has directly contributed to the transition,” explained Haydon. “People are often surprised when I tell them that the switch has been primarily driven by increased taxation of higher emissions and clever concessions, but no direct subsidies. In fact, Norway’s first EV adoption policies were implemented all the way back in the 1990s.”
Norway has explored an array of options
“When it comes to policy, Norway seems to have explored a diverse array of options, some of which have been particularly successful and others that have needed to evolve with rising adoption.
“In 1990, there was no import tax on EVs, this was followed by decreased annual registration and a 50% discount on company car tax for EVs in 2000,” Haydon continued “Then came the exception from road tolls and free parking. Then zero per cent VAT on EV purchases. Then nationwide access to bus lanes for EVs. Then zero per cent VAT on EV leases. It’s starting to look quite compelling, isn’t it? You get the picture.”
“While some of these benefits – namely parking fees, road tolls and company car tax – have been slightly decreased, they are still in place today. Perhaps the most significant of all the policies, however, is the elimination of VAT for EV purchases and leases. Being VAT exempt has delivered a crucial benefit for prospective vehicle purchasers and adoption, price parity. For a Norwegian new car buyer, the cost of an internal combustion engine (ICE) sedan and a BEV sedan are practically equivalent.
“While VAT exemption offers a substantial price reduction, it doesn’t fully explain the difference in affordability. For individuals and families, vehicles are some of the largest purchases they will ever make or one of their largest monthly expenses in the case of leasing. One study investigated the difference in affordability using a relatively lower-cost EV entry point, the Renault Zoe. It found that in Norway, a Renault Zoe was 53% of the average annual salary. In the UK, however, it was 84% of the average annual salary. Even adding 20% VAT onto the Norwegian price only brings it to 64% of their average annual salary. With far less buying power and no substantial concessions or grants, EV affordability in the UK is substantially lower.
The UK doesn’t compare
“Currently, new electric car purchases under £32,000 qualify for the £1,500 plug-in car grant (PICG). New EVs are also exempt from road tax (VED), but only in the first year of ownership. For businesses, the entire cost of an EV can be written against corporation tax, rather than across multiple financial years. For company cars, there is a reduced benefit-in-kind rate, but this is set to increase through to 2023. It goes without saying that these certainly don’t quite compare to the incentives driving Norwegian adoption.
Haydon continues: “The Norwegian government has taken a very proactive approach that is enabling everyday Norwegians to afford electric cars, they are serious about decarbonising transport and cutting tailpipe emissions across their entire country. Fortunately, with so many vehicle manufacturers developing new EV models, there is now a far greater variety of options and price points than there was even two years ago.
“This has been a monumental shift for an industry where most products take 4 years or more from concept to production. Indeed, a large part of the EV model surge has been due to future government bans on petrol and diesel vehicle sales, like in the UK in 2030. While this hasn’t particularly helped the affordability of EVs or encouraged adoption, it has certainly spurred manufacturers to develop entirely new ranges of electrified vehicles.”
Knock-on-effects
Haydon points out that government concessions and grants can play a crucial role in accelerating the electrification of the entire UK fleet. He believes that Norway’s greatest success has been to implement the most generous measures at the start of the adoption curve, slowly reeling them back as EV saturation increases. Early measures have the obvious and direct impact of enabling more drivers to purchase EVs, but there are also knock-on effects too.
“One of the most important secondary effects concerns the second-hand car market. For many countries, including the UK, the vast majority of vehicle purchases are made in the second-hand market. Increased new EV sales will inherently create a more affordable second-hand market, further accelerating adoption. There is more to the nation’s success, though, as Haydon points out:
“Norway has done a fantastic job of kickstarting national fleet electrification, but it is equally important to consider the cultural and social influence on the decision to purchase an EV over a traditional vehicle. In the UK for example, if you were to turn up at work on Monday with a new EV, your colleagues would be asking you why you decided to go electric. On the other hand, if you were in Norway and arrived at work on Monday with a new petrol or diesel car, they would be curious as to why you hadn’t purchased an EV.
“What about all the electricity needed to recharge this exponentially growing EV fleet? Critics of electric vehicles will often point out that while they may have zero tailpipe emissions, the electricity used to recharge them comes from fossil fuels like coal or natural gas. This is often a valid criticism and would certainly be the case in the UK. The UK is currently on track for a little over 50 per cent of its power coming from renewables and nuclear by 2026.
Almost entirely emission-free
“Those recharging their EVs in Norway are contributing to it having the second-highest per capita electricity usage in the world. With the small caveat that 98 per cent of the country’s energy is already renewable. This means that aside from emissions associated with production and consumables like tyres, their BEVs are operating almost entirely emission-free.
It is also important to consider the infrastructure required to electrify a nation, Haydon continues: “The UK may currently have more public chargers, but it also has twelve times the population and more than four times the total length of paved roads. This is a critical area for development and it is essential that new EV buyers are able to access a well-thought-out, functional and easy-to-access charging network. It is a prerequisite to mass adoption and something of a weakness here in the UK.
“Fortunately, the vast majority of journeys are well within the range of modern EVs and even then, most of them are commuting to work and back. If you have a charger at home and a charger at work, then you will seldom have to rely on public charging except for substantial cross-country journeys. To that end, some policies have been introduced, like the Office for Zero Emission Vehicles (OZEV) Electric Vehicle Homecharge Scheme and the introduction of mandatory EV chargers in all new build homes from June 2022. But is it enough?”
While the difference in uptake between the UK and Norway is clear, the explanation is multifactorial. As Norway punished high-emission vehicles and helped to make EVs as affordable as ICE cars, the UK has been far less aggressive, relying primarily on a blanket ban in 2030 to curb transport sector emissions. There are, of course, many more things to consider in comparing the two countries, including culture and the collective desire for action on climate change, but as we have seen, a great many UK motorists are doing their part and already enjoying the benefits of EVs.