Electric vehicles (EV) don’t produce any carbon dioxide when you drive them. This means they don’t produce any air pollution. That environmental benefit alone is enough of a selling point, but there are still challenges preventing increased sales. Those challenges include high cost, lack of range, and lack of charging infrastructure. In this blog post, we’re going to focus on the cost factor and what governments around the world are doing to mitigate this.
Why Governments Incentivize EVs
Well, if the goal is to get more people to drive EVs (and it should be, if we’re going to achieve our net zero commitment by 2050), it stands to reason that governments should make driving one seem like the better option. How? It depends.
In each country, the incentives vary, but most include tax incentives (increasing the tax burden for vehicles with higher emissions while giving tax benefits to those with lower or zero emissions, for example) and financial incentives (paying less for the EV itself) – or, in some cases, a combination of the two. These incentives are aimed at individuals (like you) and drivers of company vehicles (company cars account for most new car sales in many European markets).
Now, let’s look at some incentives around the world, starting with...
In Norway, EV’s are so popular that the government is starting to cut back on incentives already, and that’s saying something. Another fact that attests to their popularity is the fact that the price of an EV is at the same level as that of a petrol/gas car. How’s this possible? Well, not only are EVs in Norway not subject to import tax, but they aren’t subject to the 25% VAT on cars (an amount that is usually added to the value of a car after customs and import taxes).
EV drivers also get the major advantage of getting (limited) use of bus lanes in certain areas and discounts on tolls and parking fees.
As a German citizen, you get 4000 Euros off your EV (2000 Euros are paid by the government, and the other half is paid by the manufacturers). Quick caveat: This saving is limited to EVs up to a value of 60 000 Euros.
There are also two major tax-related benefits. Firstly, your EV is not subject to vehicle tax for up to 10 years. Secondly, depending on the size of your EV’s battery, you get a special tax bonus (the value of your EV is reduced by 200 Euros per kilowatt-hour battery capacity). This amount is reduced by 50 Euros every year.
In France, cars with the highest CO2 emissions must pay a surcharge – more than 10 000 Euros for vehicles with the highest emissions. If you buy an EV, you get a bonus of up to 6000 Euros (which can’t exceed 27% of the EV’s value). Another great advantage for EV drivers in France is the scrappage bonus for older petrol cars of up to 2500 Euros.
In the Netherlands, you won’t have to pay any registration taxes when you buy an EV. That’s a saving of around 2355 Euros. Add to that the fact that you get 4000 Euros off for buying new, and 2000 Euros for buying used.
As a business owner, there’s even more. Companies who support EVs do not have to pay VAT and they get an Environmental Investment Allowance (MIA). With MIA, you get an investment reduction of up to 36% of the amount invested into an EV.
The United States of America
If you buy an EV in the U.S, you are exempt from all federal taxes that depend on fuel consumption. You’re also entitled to a federal tax credit of up to 7500 US dollars.
Other incentives, like electric charging infrastructure tax credits, research project grants, and alternative fuel technology loans, vary from state to state. If you’re in the market for an EV, check what your state has to offer.
The United Kingdom
Exemption of Vehicle Excise Duty (VED) is available to anyone who buys an EV in the UK. You’ll also save up to GBP 3000 on your EV, and have the advantage of free and discounted parking in certain towns.
Oh, one more thing. Up until December 2025, EVs can enter the London Congestion Zone without paying the GBP11.50 daily charge. You’re also exempt from paying the GBP12.50 daily charge for entering the Ultra Low Emission Zone (ULEZ).
We mentioned lack of selection as one of the challenges in the adoption of EVs. China doesn’t have this problem. They have a larger selection of EVs for consumers to choose from, which is a contributing factor in China leading in the electric car sales arena.
And then there are the regulatory and financial incentives. For example, if you live in China, your EV is not subject to registration restrictions or driving bans on certain days. Then, the price of EVs with a range over 400km are reduced by CNY 30 000 (4000 Euros), and CNY 18000 (2400 Euros) for electric ranges between 250km and below 400km.
According to BNEF, EV sales will rise to nearly 60% of the global auto market by 2040. In 2010, that percentage was almost zero. We’ve come a long way. Incentives can help us get the rest of the way there.
Are you in the market for a new car? Would you consider going electric, and would any of these incentives sway your decision? Let us know!