Denmark announced the phasing out of its tax break for electric vehicles starting in 2015, which caused Tesla’s sales to surge to an all-time high in the country, but they have been virtually non-existent since then and all electric car sales have crashed.

To highlight the impact, 1,300 electric vehicles were sold in Denmark in 2016, while Tesla delivered 1,300 vehicles in December 2015 alone.

The government has now announced that they are walking back some of the changes in order to boost back EV sales for at least 5,000 more vehicles.

There was already a phase-out of the tax break planned, but they are now making it smoother since it’s really not working right now.

Unfortunately, it shows that incentives still play an important role in the electric vehicle market, but Denmark is not the greatest example since its vehicle taxes are quite steep: 180% for most cars.

Instead of paying 40% of the full tax, which was supposed to be in place for EVs this year, it’s going to be capped at 20% until they reach 5,000 new electric cars or before January 1, 2019. After that, things will get rough for EVs again in Denmark, including with a new tax on electricity when charging electric vehicles. DR.DK broke down the main points of the updated program:

  • The tax on electric cars remains 20 percent until registered 5,000 new electric cars at home. It must be done before January 1, 2019, when the tax is raised regardless of sales.
  • Then resume the previous agreement phasing-in of charges. This means that the tax rises to 40 percent minus the basic allowance of 10,000 kroner in 2019.
  • In 2020, the tax increases to 65 percent. Then to 90 percent in 2021 and 100 percent 2022.
  • In order to promote small and medium electric cars, they included a new temporary deduction in the registration fee. The deduction is 1,700 crowns per kWh of battery capacity not exceeding 45 kWh of electric vehicles and charging hybrid cars in the years 2017-2021. The deduction must generally be approved under EU law.
  • The general minimum registration fee remains unchanged at 20,000 crowns per car for all vehicles.
  • Create a fund for grants for fuel cell vehicles for use in 2017 and 2018 of five million in both years. The grant may include inter alia the expansion of the filling / charging infrastructure for fuel cell vehicles.
  • Special rule for commercial charging electric cars to the low processing rate of 0.4 cents per kWh extended generally to all vehicles in the two years up to and including 2019. From January 1, 2020, the introduction of universal electricity tax (domestic rate) for each charging electric cars both business and private.
  • For electricity for charging electric buses continued specific rule relating to low electricity tax for another four years until 1 January 2024. It shall initially be authorized under EU law.
  • The parties also agree that the fees for new gas vehicles is calculated by fuel efficiency rather than CO2 emissions.
  • At the same time, they introduced a new rate of methanol mixed with water to fuel cells designed for energy.

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