Lessons from Norway: An electric car hotspot
Surging electric car sales look set to continue as the world battles to meet tough climate goals. As manufacturers compete to bring new models to market, Norway offers lessons for other countries looking to kick-start sales.
The number of electric vehicles (EVs) on the world’s roads has risen to more than 2 million from a standing start just five years ago. For evidence that this trend will continue, look no further than the world’s biggest automotive manufacturer.
Volkswagen plans to roll out a range of affordable EVs in the coming years with the aim of selling more than 2 million battery-powered vehicles – the same number that are on the road right now – every year by 2025. Meanwhile, other OEMs have accelerated the introduction of their new EVs – in some cases by years – to keep pace with market demand.
Environmental concerns driving more countries to EVs
China and the United States make up approximately two-thirds of all new sales. China’s aggressive growth strategy aims to put 7 million new EVs on the road by 2025. Elsewhere, the number of countries in which sales of EVs are significant (>1%) has risen from just 3 in 2014 to 10 in 2016, with that number set to rise again in 2017 according to data from Bloomberg New Energy Finance.
To limit global warming to below 2C (3.6F), the target set by the landmark Paris Agreement on climate change, the International Energy Agency (IEA) says the world will need 600 million electric vehicles by 2040. When you consider that EVs were essentially just a concept at the beginning of the decade, scaling to such numbers will present significant challenges.
Battery technology the main roadblock
While improving all the time, the modern lithium-ion batteries used to power many EVs have only recently begun to be produced at scale. As sales of EVs skyrocket, the number of factories producing the batteries needs to keep pace. In 2017, the commissioned capacity of such plants was 116 GWh. Up to 289 GWh is planned for 2021 but many of those planned in Eastern Europe, China and the USA are not yet under construction.
The up-front cost of batteries has plummeted since 2010 and although running costs are lower, there is still a long way to go until the price of a new lithium-ion battery is as low as an internal combustion engine. That’s not expected to happen until as early as 2025, so government subsidies could remain crucial to keep the purchase price of EVs competitive.
As more people turn to the power grids to charge vehicles, power companies in some parts of the world are introducing EV-specific tariffs, powered by smart meters. Bloomberg New Energy Finance reports that 27 utility companies across the USA have such tariffs, with companies in the UK, Spain, Portugal and Australia set to follow suit.
A corresponding increase in demand for commodities such as lithium and cobalt can also be expected. Careful management of the availability and extraction of these resources will be essential to create a sustainable EV market, both in economic and environmental terms.
The Norwegian experience
Although sales in China and USA eclipse everywhere else, Norway is the poster-child of EV adoption. Sales of electric and plug-in hybrid cars are expected to account for 38% of the country’s new car registrations in 2017, a significant growth from the already impressive 2016 figure of 29%.
Christina Bu is the Secretary General of the Norwegian Electric Vehicle Association, which representes 50,000 members. She explains the growth was “driven by high taxes on fossil-fuel cars, an exemption for new EVs from purchase tax and sales tax, and local incentives such as free parking and the use of bus lanes in some cities.”
She says that even if some of the incentives are stripped back, the success in Norway looks set to continue. “The demand shows no sign of slowing down, as thousands of Norwegians have put money down for a slew of upcoming models.”
Lessons from the Scandinavian model
Although the country’s charging infrastructure was kick-started by public money, the private sector is now taking over with interest from several foreign-owned companies. But Bu says significant public spending isn’t the only option for other countries.
“I don’t think many other countries can or should look to copy exactly what we have done in Norway because circumstances are different. But there are elements to consider, such as bus lane access or free public parking that don’t cost much. Instead of raising taxes, countries like Sweden are about to shift car taxes onto higher polluting vehicles, so the overall tax take remains the same while encouraging more people into EVs.”