Call them the kings in the north.
Drivers in Denmark, Finland, Iceland, Sweden and — chief among them — Norway have become the world leaders in buying electric vehicles.
Together the five Nordic countries, home to roughly 0.4 percent of the planet’s population, accounted for 8 percent of the world’s battery-powered, fuel-cell and plug-in hybrid-electric cars and trucks in 2016, according to a recent report by the International Energy Agency.
Although the Nordic nations trail the U.S. and China in total electric vehicle sales, in Norway alone electric vehicles made up 39 percent of new car sales in 2016. In the U.S., by comparison, electric vehicles accounted for just 1.4 percent of new car sales the same year.
The key reason is economics: With the exception of that pickup-truck commuter or midlife-crisis convertible, automobiles are one area where consumers generally tend to act rationally. High upfront cost s force buyers to think more carefully about how much a vehicle will cost over both the short and long-term, experts say. And the governments of Denmark, Finland, Iceland, Norway and Sweden, which have a front-row seat to the impacts of climate change and have a history of robust social spending, have helped make electric vehicles that much more wallet-friendly.
The countries offer generous combinations of tax breaks and rebates for electric, fuel cell and plug-in hybrid-electric vehicles. Buyers can also get discounts on toll roads — which are much more common in the region — access to bus lanes and the use of free charging stations. And gasoline is heavily taxed: motorists in Norway, for example, can expect to shell out the equivalent of $7.68 per gallon, while the average price at the pump in the U.S. this week was less than $2.60.
Together the incentives, along with initiatives to install large numbers of easy-to-access charging stations around each country, have helped make electric vehicles — which can have a high sticker price largely due to the high costs of batteries — cost competitive with gas- and diesel-fueled cars and trucks. More than two-thirds of the drivers who bought an electric vehicle in Norway say the main reason was economic benefits, according to a 2016 survey by the Norwegian Electric Car Association.
“You see increasing EV penetration where it makes economic sense for customers to buy or own EVs,” says Reid Wilk, a partner in the automotive practice at Strategy&, a consulting firm at PwC. “It’s a really simple statement, but it’s a complicated process to get there.”
Electric car sales across the Nordic region have soared since 2010, jumping by 57 percent from 2016 to 2017 alone. Some 250,000 electric vehicles were in circulation at the end of last year, and the tally is expected to see a 15-fold increase to 11 million by 2030 as the Nordic nations work toward zeroing out their emissions, the IEA says. If achieved, emissions would be about 40 times less than if drivers bought the same number of gas- and diesel-powered vehicles.
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“It’s just cheaper to own an electric vehicle, and as a result you have seen demand rocket for electric vehicles,” says Mark Gottfredson, a partner at Bain & Company. “They’ve really led the world.”
How well that success may translate to the U.S. market, however, is a source of disagreement. Clean-tech champions trumpeted the 25-percent leap recorded between 2016 and 2017 in U.S. electric vehicle sales. But the cars remain a tiny fraction of the market — largely due to their higher cost.
Electric vehicle buyers can earn up to $7,500 in tax credits from the IRS, plus various state incentives, such as additional rebates, access to carpool lanes, and tax exemptions. But even with those discounts, Wilk says, the average cost of an electric vehicle in the U.S. is still about $2,000 higher over a five-year period compared to one with an internal combustion engine.
“That’s a really wide gap,” Wilk says. Without the incentives, the average difference over five years is as high as $12,000.
Debate in U.S. on ‘Crossover Point’
American buyers also continue to see fully electric vehicles as a luxury. Notably, the 2016-2017 surge in sales was heavily driven by Tesla, whose high-end Model S and Model X — which start at $74,500 and $79,500, respectively — saw twice the number of sales in 2017 as the next closest competitor, the more modestly priced Chevrolet Bolt EV, which is listed for $36,620. (For hybrids, the picture is more mixed, with the Toyota Prius and Chevrolet Bolt hybrid leading sales.)
“Right now it’s viewed as a novelty, people don’t know how they’re going to charge them, there are misconceptions about the range, people perceive that there are range problems, they view electric vehicles as expensive, and they view the charging as incredibly inconvenient,” Gottfreson says.
Automakers did at first face a similar challenge in Norway: Between 2013 and 2016, for example, the rate at which electric vehicles were used for vacations and day trips jumped, suggesting that it took time for drivers to become more comfortable with their vehicles’ battery range as well as the availability of nearby charging stations.
Those views may change in the U.S. as American drivers become more familiar with electric vehicles — something that analysts expect to happen as costs continue to come down and, in turn, more electric vehicles hit the road.
The “crossover point” for electric vehicles to become truly cost-competitive with gas and diesel is estimated to be roughly when the price of batteries hits about $100 per kilowatt-hour. Experts as recently as 2015 were forecasting that prices would only hit $200 by this year — instead, automakers in the past year have announced that prices are as low as $125 per kilowatt-hour, and talk is already building for $80.
How soon the tipping point will arrive, however, and how quickly electric vehicles will truly become — and more crucially, be seen — as cost competitive with internal combustion engines is unclear. Some experts, such as Bain’s Gottfredson — who himself owns two electric cars, plus a gas vehicle — predict it could be as soon as two years off. Others, such as Wilk, caution that point may not come for another decade or longer. But when it does, they agree, the change will be rapid.
“Think about how quickly iPhones supplanted Blackberries: Everybody was tied to their Blackberries. When the iPhone came out, a lot of people didn’t switch because they liked the tactile feel of the Blackberry. But the value of all those apps came out … got everybody to switch,” Gottfredson says. “We’re talking about something that is a very prototypical S-curve: you have early adopters who are paying additional money for that. When the tipping point comes and the costs are lower and the savings on an annual basis and people start to talk to people and hear about them more, then you’ll being to see demand take over.”
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Where Electric Vehicles Reign Supreme originally appeared on usnews.com
