Policy is the main driver of EV adoption.

Demand-side policy exists to increase aggregate demand for vehicles, and naturally, supply increases to even out equilibrium.

With electric vehicles, time and time again, demand-side policies like subsidizing EVs through reduced taxes or tax credits have yielded amazing results. Now that the U.S. has entered the demand side policy game, expect adoption to increase much, much faster.

What demand-side policies did Norway introduce to increase EV adoption?

Norwegian policies include:

• No purchase/import tax on EVs (1990-2022). From 2023 some purchase tax based on the cars’ weight on all new EVs.
• Exemption from 25% VAT on purchase (2001-2022). From 2023, Norway will implement a 25 percent VAT on the purchase price from 500 000 Norwegian Kroner and over
• No annual road tax (1996-2021). Reduced tax from 2021. Full tax from 2022.
• No charges on toll roads (1997- 2017).
• No charges on ferries (2009- 2017).
• Maximum 50% of the total amount on ferry fares for electric vehicles (2018)
• Maximum 50% of the total amount on toll roads (2018-2022). From 2023 70%
• Free municipal parking (1999- 2017)
• Access to bus lanes (2005-). New rules allow local authorities to limit access to only include EVs that carry one or more passengers (2016-)
• 25% reduced company car tax (2000-2008). 50 % reduced company car tax (2009-2017). Company car tax reduction reduced to 40% (2018-2021) and 20 percent from 2022.
• Exemption from 25% VAT on leasing (2015-)
• The Norwegian Parliament decided on a national goal that all new cars sold by 2025 should be zero-emission (electric or hydrogen) (2017).
• «Charging right» for people living in apartment buildings was established (2017-)
• Public procurement: From 2022 cars need to be ZEV. From 2025 the same applies to city buses

Source: Norsk elbilforening

How can we study Norway to see US EV adoption patterns?

In addition to studying charging behaviors, such as every home in Norway having a Level 2 charger in the garage or side of the house, we can also just look at broad adoption metrics.

Here, Bloomberg shows a really nice visual of the EV adoption tipping point, which has been determined to be 5% of new cars sold being electric. The USA just crossed this threshold, so expect to see a dramatic increase in EV adoption in the coming years.

So, how does the Inflation Reduction Act stack up to Norwegian policy?

Well, the USA is a much more complex market than Norway, and the policy in the USA is being rushed to curb emissions and introduce EVs to the broader market. The combination of reduced timelines and much greater scale has lead to a complex set of new policies rolled out in 2022 and early 2023 which we will try to simplify below:

• Light duty EV tax credit of up to $7,500 for new and $4,000 for used EVs is extended through 2032
• MSRP caps and income caps apply, final assembly must take place in North America, and soon critical minerals and battery components will need to come from non-risk countries
• Commercial EV tax credits worth up to 30% of the sales price
• EV Charging equipment tax credits extended through 2032
• For individual/residential uses, the tax credit remains unchanged at 30%, up to $1,000. For commercial uses, the tax credit Is 6% with a maximum credit of $100,000 per unit (up from $30,000 per property). The equipment must be placed in a low-income community or non-urban area.
• Electrifying the USPS fleet with a $3B package
• Clean heavy-duty vehicles receive a $1B package to replace class 6 and 7 vehicles with clean EVs, with rebates up to 100% for states, municipalities, indian tribes, or non-profit schools
• Additional provisions including but not limited to manufacturing, diesel emissions removal, and climate justice grant programs

Out of all of these policies, the most meaningful to most consumers is the EV tax credit, and President Biden recently released in a tweet the makes and models that qualify.

Breaking down the complex 2023 EV tax credit announcement

For the new EV tax credit of $7,500, additional guidance will be released in March 2023, but here is what we know so far. New electric sedans cannot have an MSRP above $55,000. Pickup trucks, SUVs, and vans cannot have an MSRP over $80,000. Income requirements to qualify for the tax credit are $150,000 if single, $300,000 if filing jointly, and $225,000 if head of a household. The credit will be applied to your 2023 tax return, which you file in 2024. Beginning in 2024, consumers can transfer the credit to a dealership to lower the vehicle purchase price.

These new vehicles must undergo final assembly in North America, to check on this requirement, visit the Department of Energy’s page on Electric Vehicles with Final Assembly in North America.

In March 2023, additional requirements will be released to govern battery components. 40% of battery minerals will have to come from North America or a country with a U.S. free trade agreement, or be recycled in North America (this will eventually increase to 80%). Additionally, 50% of battery parts will need to be made or assembled in North America, eventually rising to 100%. Further, beginning in 2025, “foreign entities of concern,” predominantly China and Russia, cannot have been the origin of battery minerals, and battery parts cannot be sourced from those countries starting in 2024. Additionally, battery sizes must be larger than 7 kWh.

Additional requirements also apply, and Lectrium is happy to help & discuss these policies, but we do not provide any official guidance or advice, just opinions.

Here is the link to the IRS report on which new makes and models qualify for the EV tax credit. And if you're in the market for a used car, here is a link to a breakdown of the tax credits for used vehicles.

To learn more about electric vehicles and EV charging from home, check out our EV Knowledge Hub.