Oslo, October 15, 2025 — The Norwegian government has announced plans to gradually phase out key tax exemptions for electric vehicles (EVs) over the next two years, marking the end of one of the world’s most generous EV incentive programs. The move will impact popular models such as Tesla’s Model Y, Volkswagen’s ID.4, and other mid-range electric cars that have dominated Norway’s automotive market in recent years.
The proposal, presented as part of the 2026 national budget, would make all new EVs subject to the full 25% value-added tax (VAT) by 2027. Norway’s Finance Minister Jens Stoltenberg said the change reflects the country’s success in achieving its long-standing goal of near-total electrification of passenger car sales.
Norway’s EV Revolution: Goal Achieved Ahead of Schedule
Norway’s EV adoption has outpaced every other nation in the world. In September 2025, fully electric cars made up a record 98.3% of all new vehicle registrations, according to official data. This achievement effectively fulfills the government’s target of ending the sale of new petrol and diesel vehicles by 2025.
“We have had a goal that all new passenger cars should be electric by 2025, and with an electric car share of 95% this year, that goal has been achieved in practice,” said Finance Minister Jens Stoltenberg. “Therefore, the time is ripe to phase out the benefits.”
Phasing Out EV Tax Exemptions: Timeline and Details
Since the early 2010s, Norway has led the global transition to clean mobility by offering sweeping tax breaks to EV buyers. These included exemptions from import duties, registration taxes, road tolls, and VAT — incentives that collectively cost the state billions in lost revenue annually.
However, under the new 2026 budget proposal, the government will take the following steps:
- 2026: The VAT exemption threshold will be reduced from 500,000 Norwegian crowns to 300,000 crowns (~$29,700).
- This means that EV buyers will pay 25% VAT on the portion of the car’s price exceeding 300,000 crowns.
- For example, a Tesla Model Y, priced at 422,000 crowns, would face about 30,500 crowns ($3,000) in new taxes.
- 2027: All remaining VAT exemptions will be completely removed, subjecting every new EV — regardless of price — to the full 25% VAT.
The change will also affect Volkswagen’s ID.4, Hyundai Ioniq 5, and Kia EV6, among other mid-market EVs that have so far benefited from Norway’s generous tax policies.
Balancing Incentives: Higher Levies on Fossil Fuel Cars
To maintain pressure on traditional combustion engine vehicles, the government also plans to increase the one-time registration tax on new petrol and diesel cars.
This measure aims to preserve the overall environmental incentive structure, ensuring that EVs remain financially attractive even as tax benefits are scaled back.
“The aim is not to punish EV buyers, but to rebalance fiscal policy after achieving our electrification target,” the finance ministry said in a statement.
Tesla’s Dominance Faces a Test
The Tesla Model Y, Norway’s best-selling vehicle for three consecutive years, has been at the heart of the country’s EV boom. Known for its affordability relative to premium electric SUVs, the Model Y’s price advantage could narrow significantly under the new tax regime.
If the VAT exemption is fully removed by 2027, the total cost of a Model Y could increase by as much as 75,000 crowns (~$7,400).
Despite this, analysts expect Tesla to maintain a strong market position, thanks to brand loyalty, extensive Supercharger infrastructure, and ongoing software updates that enhance vehicle performance over time.
Fiscal Adjustments and Economic Outlook
Alongside the EV tax changes, Norway’s government announced plans to increase spending from its sovereign wealth fund — the world’s largest — to support public expenditures and the green transition.
Key budget highlights include:
- A rise in spending from 534.2 billion crowns in 2025 to 579.4 billion crowns in 2026.
- Revised non-oil GDP growth projections of 2.0% in 2025 and 2.1% in 2026.
- Core inflation expected to ease from 2.9% in 2025 to 2.5% in 2026.
The government, however, operates as a minority administration and must negotiate the proposed budget with four opposition parties, including the environmentally focused Green Party. These talks could lead to modifications or delays in the EV tax phase-out timeline.
Norway’s EV Policy Legacy
Norway’s early and aggressive embrace of EVs has transformed it into a global model for electric mobility. The policy mix — high fuel taxes combined with EV incentives — pushed automakers to prioritize zero-emission models for the Norwegian market.
Industry experts believe that Norway’s next challenge will be maintaining high EV adoption while reintegrating taxation in a way that ensures long-term fiscal sustainability.
Even as subsidies wind down, charging infrastructure, renewable electricity, and urban low-emission zones will continue to support Norway’s position as a leader in the global EV transition.
Conclusion
Norway’s decision to end tax exemptions for electric vehicles marks a historic policy shift after more than a decade of world-leading EV incentives. With over 98% of new cars now electric, the country believes it has achieved its clean transport goals — but the next few years will test whether that success can endure without government subsidies.
If approved by parliament, the full phase-out of EV tax exemptions by 2027 will reshape Norway’s automotive market, challenging manufacturers like Tesla, Volkswagen, and Hyundai to adapt to a post-subsidy era.
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