Denmark’s EV sales collapse 60% on tax move

2 June 2017

An overly hasty phasing out of tax breaks on electric vehicles (EVs) in Denmark has ′completely killed the market,’ with sales plummeting 60.5% in the first quarter year on year, as sales rise in all other major European markets. This contrasts sharply with a chart-topping 80% surge in Scandinavian neighbour Sweden, according to ACEA data, and a 30% average rise across the EU. Dealers have now rolled back their EV sales drives in response to the tax U-turn and the EV industry has taken flight towards markets less hostile to their technology.

The planned transition to a post-subsidy EV market in the country has now been postponed. The liberal-led Danish government announced the staged phasing out of tax breaks on EVs in August 2015 due to budget constraints and ostensibly out of a desire to level the playing field with other fuel types.

Planned further lowering of tax breaks will now not occur in the 2016-18 period until at least 5,000 additional new EVs have been sold.

However, this may prove to be a futile target since the tax breaks are set to be progressively eliminated from 2019 anyway, regardless of sales numbers. Denmark is a high tax country like its Scandinavian neighbours. The 2019 plan will see the introduction of a 40% registration tax added to the sale of EVs in that year, minus a 10,000 kronor (€1,344) tax incentive deduction, with this tax rising to 65% in 2021 and surging to 90% in 2021 and 100% in 2022. While this is hammering EV sales, it is still far lower than the staggering 180% import tax Denmark imposes on imported vehicles powered by traditional internal combustion engines.

Head of the Danish Electric Car Alliance, Laerke Flader, said the new tax regime has ′completely killed the market,’ lambasting the premature raising of tax as not following market trends. She stressed the need to ensure that the tax environment for electric vehicles, which cost more to manufacture, remains competitive compared to combustion engine vehicles, highlighting: ′Price really matters.’

Danish tax minister Karsten Lauritzen admitted EV sales had come in lower than expected, adding: ′The agreed phase-in has turned out to be hard[-hitting] and that likely halted sales.’

The Danish approach is completely at odds with neighbour Sweden, where sales of low and zero-emission vehicles are booming, supported by a wide suite of subsidies including a five-year tax break and a 40,000 Swedish kronor (€4,097) purchase incentive.

The moves by the Danish government go against the pioneering traditions of the country in renewable energy solutions, with it being a world leader in wind power. In 2015 they were one of the biggest markets for EVs in the EU, selling 5,298 vehicles, more than double that of Italy despite the country having a population more than 10 times the size.

Now the country seems to be turning its back on its trailblazing roots.

Tesla has been one of the car brands hardest hit. As forewarned by CEO Elon Musk during a visit to Copenhagen in response to the tax change announcement, sales of their high price tag cars in Denmark are almost evaporating completely.

In 2015, Tesla sold 2,738 vehicles in the country. In 2016, they sold 176.

However, Flader is keen to point out that all this progress is not lost. She calls on the government to reinstate the tax support needed to allow dealerships to advertise tax-free prices once more and give tax predictability to allow the Danish EV industry to thrive.

It is now up to the government to deliver.