Why Norway leads the charge on electric vehicles

Transforming a city with new devices, data and business models - part one

Technologies are driving many ventures that are creating new devices, with masses of data about the product, service and customer which are then being combined in new business models. In previous articles for Foundry4 ‘Driving Innovative New Value Chains’ and ‘Electric Vehicles Driving Innovative New Value Chains’ I have outlined that industries are being transformed so corporates, startups and investors need to reconsider how their businesses and countries will change.

In the first part of this article we will look in more depth at one area where a new technology has passed to mass use with environmental and health benefits. We’ll take the case of electric vehicles and the city of Oslo, Norway, considering whether or not their implementation has been a success, what has been learnt and the impact on the value chain. This builds on the work I’ve done with leading corporates and startups in the last year with roundtables, webinars, a workshop at Williams F1 and a programme in Oslo.

Oslo leads the world

Oslo is the leading EV city in the world with over 50 per cent of car sales being EV in 2019. In fact, in Q1 2019 EV sales surpassed 70 per cent as the Tesla 3 became available. Insights from Oslo offer a view of the future in other locations as they strive to improve the environment and health in cities. Countries are aiming for higher use of electric vehicles in the coming years, as can be seen with the likes of the UK government’s plan to ban petrol and diesel vehicles by 2040.

In the first half of 2019 in Norway the sales of Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) made up 47 per cent of total light vehicle sales, with BEVs accounting for 38 per cent and and PHEVs 9 per cent of this total respectively. In comparison, China had EV sales of 4.8 per cent, Germany 2.4 per cent, the UK 1.9 per cent and the USA only 1.8 per cent. So we can see Norway is way ahead of the rest of the world.

The Norweign government, in particular the municipal government of Oslo, have been supporting the growth of Electric Vehicles for decades. Support incentives have included the 1997 toll exemption for EVs, 1999 free municipal parking, 2000 reduced company car tax, VAT exemption and the 2003’s policy allowing EVs to use bus lanes, which was one “of the best adverts for EVs” as a host in Oslo described.

Why Oslo and Norway are top of the class

The growth of Electric Vehicles for private use in Norway has been driven by various factors.

Affordable to buy

National level support on the differential tax and subsidy of electric vehicles compared to ICE (Internal Combustion Engine) vehicles. There has been No VAT, no purchase tax and subsidies for EVs.

Vehicle tax has always been high in Norway and exempting purchase price tax and VAT on EVs has provided the opportunity for comparable prices. The cost differential examples were given such as in Germany a VW Golf Petrol costs €19,520, but an E Golf €35,900. However, in Norway a VW Golf Petrol costs €33,240 and an E Golf €34,580. This price difference can be even more marked for bigger and more expensive cars which gives cars like Tesla an advantage to make them popular. This is not the case in most other countries.

Price parity, without subsidy, between EVs and ICEs is estimated to occur between 2022 to 2026 depending on factors such as vehicle type and decreases in battery cost - which are expected to fall from approximately $250 /kWh in 2018 to less than $100 /kWh in 2028.

Affordable to use

Local councils have tended to provide free parking, free charging, and free tolls for EVs. Today, they are beginning to charge for these services but still at a much cheaper rate than those faced by ICEs.

Practical to use

Local policy support enables free parking, access to charging, and the use of bus lanes by EVs.

According to the Norway National Transport Plan (2018-2029), all new light vehicles, new city buses and new light commercial vehicles should be zero-emission from 2025 and by 2030 the same should apply to all new heavy commercial vans, 75 per cent of new long-distance buses, and 50 per cent of new lorries (National Transport Plan, 2016). In line with this, Oslo has ordered nearly 100 new EV buses from BYD, Volvo and ADL since last year and plans to increase this further before 2030.

However, EV car insurance has become more expensive compared to ICE cars due to their drivers facing 20 per cent more accidents and 35 per cent higher repair costs.

Norway’s significant advantages

Norway’s sovereign wealth fund is the world’s largest at approximately $1tn for a population of just over 5 million. This has provided a very clear advantage compared with the budget constraints found in other countries.

Hydroelectric power advantage in Norway is also very significant as around 98 per cent of electricity comes from this green, on demand power source. Electricity is the main kind of power used for heating, cooking, and lighting in homes and businesses. The predicted EV energy requirement is therefore only approximately 6 per cent of the total electricity demand.

The mix of energy supply in other countries is very different with gas, fossil fuels, and the intermittent green energy sources of wind and solar all part of energy provision. This makes the power situation less flexible and more costly.

This is the end of part one of this article. In part two we’ll look at customer insights from the Norwegian EV market and lessons for corporates and startups to consider.