The Top 5: Countries Offering Highest Incentives To EV Consumers

Passenger cars account for nearly 45 per cent of global greenhouse gas emissions from the transport industry across the globe. In recent times, proper weightage has been given to the vehicles, deriving their mileage from renewable sources, in global efforts to bring down emissions. The enthusiasm, coupled with technological advancements, has made it possible for the recent rise of EVs in not only developed economies but also in the developing world. For a faster adoption of EVs, governments have often considered the incentives, to EV consumers, as an essential tool to bring about the EV revolution in their respective countries.

As the subsidies or incentives are provided for encouraging initial EV adoption, it is needless to say that they won’t be there forever, and may cease to exist someday. In fact, with the start of the new year, countries like China have already stopped giving EV subsidies. Germany, on the other hand, ended government incentives for PHEVs on 31 December 2022 and is reducing subsidies for BEVs between 2023 and 2025. Nevertheless, other countries are still providing huge incentives, benefitting early consumers of the technology, which is going to stay.

We look at the top countries giving the best incentives for buying an electric vehicle (EV) in the world.

Norway

The EV-frontrunner Norway is one of the countries with the most lucrative EV incentives in the world. Norway has been implementing incentives to buy electric vehicles – import and VAT tax exemptions – since the 1990s. The government heavily supported the take-up of zero-emission vehicles (ZEVs) to accelerate the electrification of the road transport sector. As per the national projections, transport emissions are projected to decrease by nearly one-third from 2019 to 2030.

Norway’s tax incentive package offers a range of benefits to zero-emission vehicles (ZEVs), including exemption from registration tax, VAT, and motor fuel taxes, as well as reduced road taxes, ferry fees, and parking fees of at least 50 per cent. The results of its EV-friendly measures are quite visible.

About two-thirds of new passenger vehicles sold in the country in 2021 were fully electric. However, the incentives aren’t going to long last. As the ZEV market has become better established, the government has started scaling back some of these incentives.

France

The pandemic period saw a slump in sales due to corona crisis. France was one of the countries that sustained the EV market with the help of incentives. In mid-2021, France offered a maximum subsidy rate of €6,000. With the new year’s dawn, the subsidy was reduced by €1,000. Further, the environmental bonus now only applies to battery-electric and fuel cell cars with a price of less than €47,000 and a mass of fewer than 2.4 tonnes.

For electric vans, there is no price limit and a maximum weight of 3.5 tonnes – the subsidy is 40 per cent of the gross price (plus the cost of the battery, if it is leased) up to a limit of €6,000 for private individuals and €4,000 for businesses. France’s multi-dimensional approach considers low-income households, increasing the subsidy by €2,000 (previously: €3,000) to a maximum of €7,000 (passenger cars) and €8,000 (vans). In addition, the used electric vehicles in France will continue to be subsidised with €1,000 or €3,000 in the case of a low household income.

The United States

The incentives offered to EV buyers in the United States of America are quite complicated. The US passed the Inflation Reduction Act in August last year which tweaked rules for an existing tax credit associated with the purchase of clean vehicles. The law would bring more manufacturing and supply chains within US borders and those of allies. It changed some requirements to get the full $7,500 value of the clean vehicle credit and extended the tax break till 2032.

The clean vehicle credit is a non-refundable tax credit, which means that the buyers only get the full benefit if they have an annual federal tax liability of at least $7,500. The eligibility condition for the credit is that the EV must come to the buyer’s service/possession (not the date of purchase) after December 31, 2022.

Furthermore, there is income eligibility in place as well. Married couples don’t qualify for the new-vehicle credit if their modified adjusted gross income on a joint tax return exceeds $300,000. The limits are $150,000 and $225,000 for single tax filers and heads of household, respectively. Further, the price of vehicles also matters. The credit is unavailable if a manufacturer’s suggested retail price exceeds $80,000 for vans, sport utility vehicles, and pickup trucks, or $55,000 for other vehicles. The provision that roots domestic manufacture and supply chain is that to be eligible for the tax credits, the vehicle must have undergone final assembly in North America.

Australia

To achieve a 43 per cent reduction in CO2 levels by 2030 and Net-zero by 2070, the Australian government has introduced several measures, including incentives to encourage the adoption of electric vehicles (EVs). The Government has pledged 75 per cent of its fleet will be made up of battery EVs by 2025.

One of the incentives is the removal of the 5 per cent import tariff for EVs priced under the Luxury Car Tax limit, resulting in a $2,500 lower purchase price. Moreover, low-emission vehicles now have a higher Luxury Car Tax threshold of $84,916, as compared to the standard vehicle Luxury Car Tax standing rate of $71,849. This makes it more affordable for Australians to purchase low-emission vehicles.

The Federal Government has also removed the Fringe Benefits Tax, which saves $4,700 annually for individuals with a salary sacrifice agreement for a $50,000 EV. These incentives are significant steps in the government’s efforts to reduce carbon emissions and transition towards a cleaner and more sustainable mobility option. In addition, region-wise incentives are also offered by respective administrative authorities across Australia.

India

In line with its goal of achieving high electric vehicle (EV) sales penetration, India has implemented policies that target 70 per cent EV sales for all commercial cars, 30 per cent for private cars, 40 per cent for buses, and 80 per cent for two and three-wheelers by 2030.

The latest budget called for an extension of the FAME II subsidy scheme through FY2024. The EV sector received a major boost from the announcement in the Budget 2023, extending the subsidies on EV batteries for one more year. The incentives include Rs 15,000 per kWh up to 40 per cent of the cost for two-wheelers, Rs 10,000 per kWh for three-wheelers and four-wheelers, and Rs 20,000 per kWh for E Buses and E Trucks.

Electric cars and SUVs are eligible for the subsidy. However, the ex-factory cost is capped at Rs 15 lakhs. That means EV four-wheelers costing over Rs 15 lakhs are not eligible for the subsidy. For battery-powered two-wheelers, the vehicle must have a minimum range of 80 km and a minimum top speed of 40 km/h. Furthermore, the electric two-wheeler must be under Rs 1.5 lakhs.