Wednesday, 15 June 2016

Norway To Ban New Fossil Fuel Cars By 2025: What Effects Will This Have?


Rumours are abound that Norway will outlaw all sales of new fossil fuel-powered cars by 2025- how will this impact the country, its people and its businesses?

Tesla Model S (Image: caricos.com)
A lot of Norwegians own electric cars. 24.4% of all new cars sold in Norway in the first 3 months of 2016 were plug in electric cars- that's pure electric, not including hybrid cars. This is rapid shift away from traditionally powered cars towards electric is just part of Norway's environmental drive (they were also the first country to ban deforestation), which through effective incentivisation has resulted in the Scandinavian nation becoming the world's leader in electric car usage.

So if any country were to ban fossil-fuelled cars in the near future, Norway would be it- but, other than the typical environmental effects, what would be the impact of such a law?

Firstly, it'll be a massive win for some car companies, especially Tesla (whose entire lineup is electric) and Toyota (another leader in electric, and now hydrogen, technology). It's no surprise that Tesla founder Elon Musk immediately tweeted out a message saying "You guys rock" to the Norwegian government upon hearing the rumours. While other manufacturers do make cars that will still be eligible for sale, no doubt these two in particular will have a bit of a head start due to the proliferation of electric power already in their range of cars.


Other companies will have to buck up their ideas, and accelerate their shift away from petrol and diesel. It is highly unlikely that Norway's law change will provoke a revolution in the car industry and lead to a complete redirection of existing strategies, but electricity and other alternative energies are already likely to be in the future plans of most firms due to the inevitable oncoming demise of fossil fuels.

But they will have to improve their current efforts. BMW, for example, does produce hybrid and PHEV versions of its most popular 3 Series model, but sales are incredibly low, largely due to the high prices. For Mercedes, Audi, Nissan and many other companies it's the same story. These firms will have to devote increasingly more effort in both innovating alternative fuelling technologies and also in making these cars more affordable. BMW has already embarked on this journey, with its new 'i' series of cars- but even for them, it's early days.

These carmakers will have to step in by 2025, because Toyota and Tesla alone cannot cover all the bases and demands of the Norwegian people. They will certainly try, but many people will remain loyal to other brands and demand that they be catered to, post-ban.

An interesting issue arises when you consider what happens to companies that are unlikely to be so receptive to electric power. This is hardly going to be a headline issue, because it concerns very niche manufacturers such as Lamborghini, but it does raise the possibility of many Norwegians hopping across the border to purchase a petrol or diesel car and bring it home.

The used car market may also receive a boost. The ban is expected to only affect sales of new cars, and considering that electric cars are generally pricier than their fossil fuel equivalents, many people with less money to spend will be forced to resort to the used market.

Consider the effects of this new law on the fuel industry in Norway. Thanks to the North Sea, its economy benefits hugely from oil consumption, so it seems counterproductive that Norway would risk damaging its own revenues by banning fossil fuel cars. However, the Norwegian government knows its stock of oil will not last forever. It has begun weaning itself off oil, and this is a part of that process. It's a move that may have minor short term negative repercussions, but arguably in the long term is the most sensible, as it reduces the risk of any massive future crises.

On a more local level, petrol stations will also have to adapt. They will not close down (fossil fuel cars will remain on the road), but we may see an increase in the trend of electric charging points opening up at these stations, eventually (in the long long run) replacing petrol pumps.
Could the traditional petrol station become a thing of the
past in Norway?

However, it's not a simple case of adding charging points alone. Charging an electric car can take hours at most, so resting areas will have to be provided, like lounges or coffee shops. This will be a further cost to petrol sellers, but will benefit popular coffee retailers and may ultimately create new jobs.

It's key to remember though that there's one crucial determinant of all that we've talked about, and that is the rate of innovation in electric and alternatively fuelled cars. For example, if electric cars can by 2025 charge in 2 minutes, or if hydrogen cars (which fuel in the same time as a petrol car) becoming popular, the last paragraph may be completely incorrect. If automotive firms are able to quickly produce budget electric cars, perhaps the used car market may not receive such a significant boost, and Tesla and Toyota may not dominate as much as we've proposed.

The rumoured law changes will undoubtedly be interesting to see unfold, and could if successful inspire many other countries to follow suit in the future. The next 8 years are crucial to its success; if, by 2025, electric cars remain more expensive and inconvenient than their fossil fuelled counterparts, the proposal may be a failure.
Mohammad Lone Editor