Norway is a comparatively small European country in Northern Europe, bordering Sweden to the east, Finland, its southern neighbour in the north and similarly a short border with Russia to the east in the far north of the country. The sea borders the entire western, northern and southern boundaries with the North Sea and northern Atlantic Ocean and the Barents Sea to the north.

The population of 5,149,192, according to CIA estimates in July 2014, is comparable with the Republic of Ireland. Around 1.0m live around Oslo, the Norwegian capital, in the south of the country. Altogether some 80% of Norwegians live in urban areas. Some two-thirds of the land mass is mountainous and the rugged Norwegian coast has some 50,000 islands off its fjord coastline. This includes Svalbard to the north of the country in the Barents Sea, which like a large part of the northern half of Norway, lies inside the Arctic Circle.

Norway has held two referendums on membership of the European Union, the last in 1994 and on both occasions opted to stay out. Even so, it is a member of the European Economic Area and according to the CIA, makes a sizeable contribution to the EU budget. The state-owned petroleum sector is the largest export revenue earner in the country’s economy and the country is the third largest exporter of natural gas and seventh largest oil exporter. State revenues from the petroleum sector are invested in the world’s largest sovereign wealth fund. According to the CIA, this was valued at over €633 billion in January 2014. Returns from the fund are used to help finance public expenditure.

Hydropower facilitates EV uptake

Norway’s mountainous terrain and position in the northern hemisphere means the country is able to harness hydropower to generate electricity. Just 2% of the country’s electricity is generated using fossil fuels, according to the CIA. Hydropower generates 92% and a further 2% is generated from other renewable sources.

That puts Norway in a strong position when it comes to the use of electric vehicles (EVs). According to Statistics Norway, of the 2.5 million cars on Swedish roads in 2013, 17,770 were EVs, compared with 8,031 in 2012. By the beginning of April 2014, a further 5,000 had been added, with 44% of EVs registered in Akershus and Oslo counties. Some 33% were registered in the three larger Norwegian cities of Oslo, Bergen and Trondheim.

Model S challenges LEAF dominance

The majority of the EVs are Nissan LEAFs. Research by cars21.com carried out last year shows that 78% of EVs were registered by individuals and 22% by companies, compared with a market norm of 60/40 for individuals/companies. The report suggested that there are over 4,500 public vehicle-charging points available in the country. The report quotes a 2013 survey of EV owners from the Norway EV Association, which profiles EV users; ‘The typical Norwegian EV user is a middle-aged family father with higher education and income, who owns a Nissan LEAF as one of two cars.’

This year the LEAF is facing competition from the Tesla model S. In the first half of 2014, the Tesla has been the second best-selling car in Norway, with 3,134 registrations and a 4.3% market share. Orders were taken two years before delivery and the high number of registrations is a reflection of the arrival of the Model S on the Norwegian market. Orders for it are now cooling off, as those customers are satisfied.

The cars21 user profile continues: ‘He uses his electric car on a daily basis instead of a traditional petrol or diesel car. He uses the electric car for commuting, after work activities, and not for longer holiday trips. His next car will also be electric. The typical EV owner has a charging outlet at home and probably also at work. He uses public charging stations less frequently.’ Even so it appears that the widespread public charging network is now stimulating EV demand outside Norway’s cities.

Tax incentives for business drivers

As the business car EV take-up suggests, EVs may have captured the imagination of private buyers, but do not figure greatly in fleets. Øystein Halsebø is general manager of ALD Norway, ‘For electric vehicles, the government has given very attractive benefits,’ he says, ‘That means no import tax, no VAT, reduced road tax, free parking in public parking spaces, use of bus-lanes, 50% reduction in company car taxation and no toll ring city tax etc.’ The toll ring city tax is a toll applied to cars entering Norwegian cities such as Oslo, Trondheim and Bergen.

VAT is levied at 25% in Norway and the city toll ring could add around €5 per day to a commuting journey, which could total over €200 in the course of a year.

Øystein says that the first models were small cars bought by families as a third car. Now after the Tesla and e-Golf, he expects that demand for electric company cars will rise. At the same time sales of light CV EVs have remained small with approximately 220 sold. Øystein also reckons that sales of EVs have now passed the 30,000 mark.

Hybrid uptake slow in Norway

Hybrids have not been so popular, as Øystein explains, ‘In the early phase, hybrids were smaller vehicles, not typical company cars. They have limited import tax advantages as they do not consume much less fuel than a similar diesel vehicle but are heavier. (Norwegian registration tax is based on weight, emissions and horsepower).

‘When mid size and large station-wagon hybrids become available at reasonable prices, company car sales will increase. Plug-in hybrids will be the future. People could benefit from low cost electricity and drive in the morning peak traffic with zero emissions.

The year to date market share for hybrids is 7.8% vs. 6.7% for 2013.’ On the other hand, plug-in hybrids do not currently attract the same incentives as battery electric cars.

LeasePlan is more specific regarding market share for plug-in hybrids, which was reckoned to represent 0.9% of the total business car sector at the end of July 2014. Similarly, the company estimates that for business use, EVs represented 6.1% of the business market at the end of July 2014, compared with 18.3% for private buyers.

Volkswagen Golf popular with fleets

According to ACEA data, Norwegian new car registrations had risen by 2.5% to 72,385 in the first half of 2014, compared with the same period in 2013. In 2013, new car registrations reached around 142,000 and business car registrations were responsible for around 43% of that total, approximately 61,600. By comparison, business sales dominate the light CV sector. Of the 31,000 new light CVs registered in 2013 around 90% or 27,400 were for business use.

Since the Volkswagen Group is strongly represented in Norway and the Volkswagen Golf is the best selling car in the country, it is not particularly surprising that it is also the best selling car for business use, enjoying a 7.3% market share. The Toyota Auris is the second best selling business car with 3.9% of the sector. It’s not surprising to find a Scandinavian car in the top three and the Volvo V40 claims a 3.6% business car share. SUVs are growing in popularity, which is perhaps not surprising in a country which experiences extensive snow and ice in the winter months. LeasePlan reckons that SUVs now account for some 19.5% of Norwegian business cars.

Volkswagen also makes a strong showing in the light CV sector, which as we have already suggested is dominated by business sales. Volkswagen took a 38.1% market share in 2013, according to LeasePlan and a 34.4% share according to ALD. Small and mid-sized vans dominate the sector, with the Volkswagen Caddy the best seller, according to ALD, followed by the Volkswagen Transporter, Peugeot Partner, Ford Transit Connect and Mercedes-Benz Vito.

Opportunities for car sharing

Norway might not prove to be a popular place for car sharing schemes, because of the relatively small population and small cities, but the comparatively high penetration of EVs and highly urbanised populations could counter that. LeasePlan reports that: ‘Up until now car sharing has not taken off, but more and more large companies are moving to newly developed urban areas with few parking spaces, so we expect to see an increase in this product.’

ALD does not appear to have seen much growth yet, though, ‘The car sharing is in an early phase,’ reports Øystein Halsebø, ‘In the beginning it was more linked to EVs and CO2 friendly cars. This is a concept more for big cities and there are not that many big cities in Norway. The car-sharing pool in Norway is estimated at around 500 vehicles.’

Norway appears to have several taxes that apply to business cars, as Øystein explains, ‘The import tax on vans is substantially lower than on passenger cars.

‘In addition we have a scrapping tax of 2,400 NOK (€316). All passenger cars have a load of 100% of the calculated tax while LCVs are charged 22% of the components in the tax.

‘Company car drivers are taxed according to this basic rule: from 0-280,100 NOK list price (€36,870), you add 30% on top of your salary, from 280,100 NOK ((€36,870) upwards you add 20%. For EVs you reduce the list price by 50%.

Van drivers who bring the vehicle home for the evening have to record when they drive straight to a job location next morning, which is not where they normally work. GPS tracing systems help people to avoid the risk of paying tax on vans. The basic rule for a van is to be left overnight in the office location.’

LeasePlan also highlights the problem for EV lessors, because the lease is not VAT exempt as it is for private buyers.

Leasing is the most popular method for financing business cars. LeasePlan estimates that operational leasing is responsible for around 30% of business. The company has also seen a trend towards a cash allowance and private leasing. ‘Private leasing increased by 57% last year from 2.1bn NOK (€0.27bn) in Q2 2013 to 3.3bn NOK (€0.43bn) in Q2 2014.’

What is special in Norway is that all car dealers give buy-backs’, says Øystein Halsebø of ALD. ‘This set up involves the customer, the car dealer and the bank (leasing company) or the Captive. The customer has a lease and the bank is not involved with the sale and risk of the used car. The dealers just buy back the car from the bank for the price they agreed before the start of the lease. This is the most common solution in volume because the distribution is done by all local dealers across the country and mostly used by the small and mid size customers with straightforward needs.’