Norway reviews car taxes, reaffirms electric subsidies after boom

OSLO, May 12 (Reuters) - Norway’s government said on Tuesday it would review high taxes on cars but reaffirmed some of the world’s most generous subsidies for electric vehicles, which mean one in five cars sold in the Nordic nation so far in 2015 is battery-powered.

A revised budget said that the runaway success of electric cars in the nation of 5 million people meant a projected tax shortfall of 2 billion crowns ($267.79 million) for 2015 because of exemptions from value-added tax and other benefits.

The right-wing government said it would review car taxes and work out new rules for 2016, but stressed that policies would “stimulate a newer, safer and more environmentally friendly car fleet.”

Last month, electric car sales in Norway reached a cumulative total of 50,000, or two percent of all cars on the road. They make up fractions of a percent in most nations.

It also meant sales reached a threshold set for a review, leading to fears among electric car owners of radical cuts. The budget revision comes as Norway’s government said in its mid-budge review that economic growth would slow as the country’s energy’s sector shrinks.

“We are very positive that this electric vehicle success will continue,” Petter Haugneland of the Norwegian Electric Vehicle Association told Reuters, after reforms stopped short of rolling back many generous benefits.

Many tax breaks for electric cars would be maintained until 2017, as planned, and then gradually phased out, the budget said. It also extended some tax breaks, now applied only to private buyers, to leased electric vehicles.

The government would also give local authorities more say over policies such as allowing electric cars to drive in bus lanes, or to be exempt from parking charges and road tolls.

And it might offer more benefits for owners of hybrid cars, which run on both petrol and electricity.

“There are still reasons to say ‘look to Norway’ when it comes to electric vehicles,” said Frederic Hauge, head of the Norwegian environmental group Bellona, who drives a Tesla Model S.

Still, he criticised the government for indicating that it might favour cheaper, small electric cars over Teslas, which start at about $70,000. He said small cars were often bought in Norway merely as second cars.

Norway accounted for a third of all European battery-powered car sales last year, official data show, and 19 percent of all cars sold so far in Norway in 2015 were electric, against 13 percent in 2014. ($1 = 7.4684 Norwegian crowns) (Reporting by Nerijus Adomaitis and Alister Doyle)