Implications of Tax Policy Changes on the Norwegian Electric Vehicle Market : An empirical analysis of changes in the value-added tax and the one-off registration tax

Abstract

Norway has been a global frontrunner in EV adoption over the past decade, largely driven by extensive subsidies. In January 2023, the Norwegian government implemented a value-added tax on EVs priced above NOK 500,000 and introduced a weight component to the one-off registration tax, both contributing to an increase in the tax payable for EVs. In this thesis, we aim to analyze the impact of these tax policy changes on the number of first-time registered EVs in Norway. By employing the difference-in-differences methodology with Sweden as the control group, we estimate these effects after the tax policy changes are implemented. To interpret our findings, we draw on the theoretical principles of the elasticity of demand for durable goods, as well as substitution theory with a particular emphasis on intertemporal substitution and substitution across goods. Our results suggest that the tax policy changes contributed to a significant decrease of 72.11 percent, on average, in the number of first-time registered EVs in Norway after the policy changes were implemented. Notably, despite this decline, the EV sales share remains consistent with the levels observed in 2022. Our findings indicate that a substantial portion of the observed effects may stem from a short-term response to the price increase, impacted by intertemporal substitution.