Buyers Aren't Dumb: Huge EV Subsidies Sell Tons of Cars

Jim Motavalli

Jim Motavalli | May 06, 2014

Let’s agree that electric cars are too expensive for mere mortals, and they’d be massively more popular if they were cheaper. And let’s further stipulate that incentives work, and that many people buy EVs because of them. A new report from the International Council on Clean Transportation looks at the global picture, and finds financial subsidies so rich they’re disrupting business as usual—especially in Holland, Norway and one visionary American state.
 The Tesla Model S is a bestseller in Norway, Holland and California. (Jim Motavalli photo)In Norway, which just happens to be the fourth-richest country in the world, both the Nissan Leaf and Tesla Model S have been number one on bestseller lists. Not just the most popular electric car, the most popular car. EVs are 6.1 percent of all Norwegian new car sales, and 5.6 percent of Norway’s. In the U.S., California is a contender with four percent of all sales. And it’s not hard to see why.
A Leaf in Norway costs less than a Volkswagen Golf, largely because they’re exempt from the country’s very high car taxes, but that’s not all. Electricity is free at thousands public chargers, insurance costs are really low, and both ferry and regular road tolls are waived, as are many parking fees. Even your charger installation is subsidized. Total subsidies amount to about $8,500 per car per year, and that’s after you buy the darned thing.
According to the report, the Dutch subsidy on a typical plug-in hybrid EV is an eye-popping $52,000—or almost three quarters of the car’s total cost. There’s no registration fee or annual taxes. In 2013, EV sales there were six times what they were in 2012—up more than 400 percent. “Norway and the Netherlands are good examples of markets where high levels of fiscal incentives lead directly to high numbers of EV sales,” says Peter Mock of ICCT Europe.
 The Renault Zoe (Europe's version of the Nissan Leaf) is a bargain in some countries, and expensive in others (especially Germany). (Renault photo)Norway’s incentives won’t last forever. They’re set to expire either in 2018 or whenever sales reach 50,000—which will be way before 2018. The key question is whether EVs will be established by then, or whether they’ll die a death without subsidies. But Americans don’t get incentives for buying Toyota Priuses anymore, and it doesn’t seem to have affected sales.
California not only allows single-occupant EVs to travel in the HOV lanes, it also offers parking incentives in many places and gives out $2,500 point-of-purchase rebates. EV sales zoomed up more than 50 percent in 2013 over 2012.   
 The Nissan Leaf is gaining market share, especially in places with incentives. (Jim Motavalli photo)Nic Lutsey, program director for ICCT in the U.S., says it would be a mistake to think the Norwegian or Dutch experience can be easily duplicated everywhere--sky-high European car taxes created that opportunity. "Not every government has the same fiscal policy options," he said. "But they still have a lot of levers at their disposal--access to carpool lanes, preferential parking, and zero emission mandates like California's."

Some countries are examples of what not to do. Germany, for instance, has given out huge subsidies for solar, but it’s chintzy when it comes to EVs. Buy a battery Renault Zoe there and it will cost $37,718, versus $26,095 for a similar but gas-powered Renault Clio. There are EV incentives, but they’re tiny. EV owners actually end up paying more taxes than they would on an internal-combustion car, which is why they’re a minuscule 0.2 percent of the new car market. The UK, also oddly parsimonious on electric cars, has the same market share.
The bottom line is that EV sales still need to be jump started with subsidies. But since battery prices are coming down rapidly, and per-car costs are coming down as volumes grow, they won’t need them forever. A few more years of help should get them onto a level playing field.

Get the Car Talk Newsletter

Got a question about your car?

Ask Someone Who Owns One