OVERVIEW OF INCENTIVES AND POLICIES FOR ELECTRIC VEHICLES IN
THE EUROPEAN COUNTRIES
, Sreten Simovic
, Milanko Damjanovic
Summary: Governments of the EU countries—motivated reduction of fosile fuels use
and by long-term targets for climate change mitigation—have set goals to increase
electric vehicles’market share in future. In support of these goals, governments of
some countries have enacted direct subsidies, fiscal incentives, and regulatory policy
to help growth the share of electric vehicles (EVs) into the national car fleets.
The focus of this paper is on incentives and direct subsidies for EV customers. It
analyzes the impact of direct fiscal policies and many other consumer-oriented policy
actions, which being utilized at local and national levels. These other actions include
incentives for charging equipment for companies and citizens, public installation of
charging equipment, preferential parking for EVs and utility policies that promote EVs.
This paper identifies countries with varying market growth in electric vehicles,
quantifies the different stimulative policies and results of these policies. The paper also
links the level of incentives to the level of electric vehicle market share and sales
growth, seeking to draw conclusions about the impact of different incentive programs.
Unfortunately, in the countries of the Western Balkans there are no stimulating
measures to encourage the purchase of electric vehicles, and this paper has the goal
to give the aims to help decision-makers in defining the right measures in this region.
Key words: electric vehicles (EVs), incentives, policies, fiscal measures, Western
Balkan Countries (WBC)
Governments around the EU and world—motivated by long-term targets for
climate change mitigation and reduction of liquide fossil fuel use—have set goals to
increase electric vehicles’ (EVs) future market share. In support of these goals, some
Associate Professor PhD Radoje Vujadinovic, Podgorica,University of Montenegro-Faculty of Mechanical
Engineering, (e-mail firstname.lastname@example.org)
Assistant Professor PhD Sreten Simovic, Podgorica,University of Montenegro-Faculty of Mechanical
Engineering, (e-mail email@example.com)
(8 Pt normal)
Assistant Professor PhD Milanko Damjanovic, Podgorica,University of Montenegro-Faculty of Mechanical
Engineering, (e-mail firstname.lastname@example.org)
LOGO WILL BE HERE
Vujadinovic et al.
governments have enacted direct subsidies, fiscal incentives, and regulatory policy to
help accelerate the movement of electric vehicles into the marketplace .
In the meantime, the number of electric vehicle models is increasing as early
market adopters have begun to purchase these advanced-technology electric vehicles.
Plug-in vehicle sales in Europe reached 408.000 units in 2018, 33 % higher than in
2017. These include all Battery Electric Vehicles (BEV) and Plug-in Hybrids (PHEV)
in Europe, passenger cars and light commercial vehicles. However, in the context of
overall automobile sales, the consumer uptake of electric vehicles has been generally
limited to less than 1% in nearly every major auto market.
Figure 1. Europe plug/in vehicle sales&share 
This paper identifies markets with varying market growth in electric vehicles
and quantifies the taxation difference between electric vehicles and their conventional,
non-electric counterparts. The paper links the level of incentives to the level of electric
vehicle market share and sales growth, seeking to draw conclusions about the impact
of different incentive programs.
2. OVERVIEW OF INCENTIVES AND POLICIES FOR ELECTRIC VEHICLES IN
THE EU COUNTRIES
Societal changes and technological development have triggered a amazing
evolution in mobility. Alongside other trends, such as autonomous driving, car sharing,
electric mobility is also gaining inertia. Electric mobility has a great chance to help the
EU to achieve its goals of reducing greenhouse gas emissions, air pollution, noise and
dependence on oil. However, the success of this assistance will depend on a number
of factors, such as the share of electric vehicles in the overall vehicle fleet and how
environmentally friendly electric vehicles can remain throughout their life cycle.
Paper title, lower case (9 pt Italic)
Global sales of new EVs have been growing significantly in recent years,
largely driven by the mass expansion of this mode of transport in China. Despite its
rapid growth, the EU market for such vehicles is still small, and largely dependent on
support policies. Most electric road vehicles are concentrated in a few northern and
western Member States, although southern and eastern ones have recently recorded
the biggest sales growth.
Over the years, the EU has taken various actions to support electric mobility.
For instance, EU-level measures have been encouraging the use of renewable
electricity and smart charging; helping to develop and standardise charging
infrastructure; and supporting research on batteries. Local, regional and national-level
are also promoting electric mobility. Countries that offer plentiful incentives and good
charging infrastructure typically have a bigger market share for EVs.
Table I: Support measures for EVs in Europe
Blue colour: support measure still existing in 2017; brown colour: support existing sometime between 2010 and
2016 but phased out by 2018. Source: European Alternative Fuels Observatory, 2017b
Vujadinovic et al.
Financial incentives for e-mobility typically include investment incentives for the
procurement of EVs and / or for building an e-vehicle charging infrastructure or tax
policy measures favoring EVs.
There are clear differences in the taxation benefits provided for electric vehicles
and sales of electric vehicles across the major vehicle markets. For example, Norway’s
fiscal incentive of about 11,500 EUR per BEV (equivalent to about 55% of vehicle base
price) is associated with a 6% market share for BEV in 2013, nd a 90% market share
increase from 2012 to 2013. Similarly, the fiscal incentive in the Netherlands of about
38,000 EUR for PHEV (equivalent to about 75% of vehicle base price) in 2013 is
associated with a 5% market share for PHEV in 2013, and a 1,900% market share
increase from 2012 to 2013 .
These two examples show how national fiscal policy can offer a powerful
mechanism to reduce the effective total cost of ownership and entice consumers to
purchase electric vehicles.
The focus of this paper is on comparison of the volume of incentives with the
sale of electric vehicles in European countries. It analyzes the impact of direct
consumer fiscal policy, but also and other consumer-oriented policy actions
simultaneously being used on national and local levels.
Other actions include incentives for home and workplace charging equipment,
public installation of charging equipment, special parking for EVs and policies that
promote EVs at local level. Other important incentives are those directed more towards
vehicle manufacturers, such as research and development (R&D) funding, vehicle
efficiency and CO2 standards etc.
This paper is focused primarily on major national-level policies, but also take
into account and regional-and city-level policies and incentives.
An overview of tax incentives for electric vehicles in the EU is given in the table
Table II: Overview on tax incentives for electric vehicles in the EU 
Electric vehicles are exempt from fuel consumption (pollution) tax,
ownership tax and company car tax. In addition, a deduction of VAT is
applicable for zero‐CO2 emission cars (e.g. electric and
The Austrian automobile club ÖAMTC publishes the incentives granted
by local authorities on its website (www.oeamtc.at/elektrofahrzeuge).
Electric vehicles pay the lowest rate of tax under the annual circulation
tax in all three regions.
In the Brussels‐Capital region, financial incentives apply to companies
electric, hybrid or fuel‐cell vehicles.
Electric and plug‐in hybrid (until 31 December 2020) vehicles are
exempt from registration tax in Flanders. Incentives (“Zero Emission
Bonus”) for the purchase of battery electric and hydrogen‐powered cars
and vans are granted.
The deductibility rate from corporate income of expenses related to the
use of company cars is 120% for zero‐emissions vehicles and 100% for
vehicles emitting between 1 and 60g CO2/km. Above 60g CO2/km, the
deductibility rate decreases from 90% to 50% progressively.
Paper title, lower case (9 pt Italic)
Electric vehicles are exempt from ownership tax.
An incentive scheme grants:
2.700 EUR for a new electric vehicle (from L1 to L7);
5.400 EUR for a new plug‐in hybrid M1, with emissions < 50g
10.800 EUR for a new electric vehicle from category M1.
Vehicles emitting less than 120g CO2/km are exempt from registration
tax and pay the lowest rate of tax under the annual road tax.
Electric, hybrid and other alternative fuel vehicles are exempt from the
road tax (this tax applies to cars used for business purposes only).
Electric vehicles (BEVs) pay only 40% of the registration tax (in 2017).
This percentage will be gradually increased at 65% in 2018, 90% in
2019 and 100% in 2020. Hydrogen and fuel cell‐powered vehicles are
exempt from registration tax until the end of 2020.
Pure electric vehicles always pay the minimum level of the CO2 based
Regions have the option to provide an exemption from the registration
tax (either total or 50%) for alternative fuel vehicles (i.e. electric, hybrids,
CNG, LPG, and E85).
Electric vehicles and vehicles emitting less than 60g CO2/km are not
subject to the tax on company cars.
Electric and hybrid electric vehicles emitting 20 g/km or less of CO 2
benefit from a premium of €6,000 under a bonusmalus scheme.
An incentive scheme grants an extra €4,000 for switching an eleven year
or more diesel vehicle for a new BEV (or €2,500 in case it’s a PHEV).
Electric vehicles are exempt from the annual circulation tax for a period
of ten years from the date of their first registration.
From July 2016, the government granted an environmental bonus of
€4,000 for pure electric and fuel‐cell vehicles and €3,000 for plug‐in
hybrid and range‐extended electric vehicles.
Electric and hybrid vehicles are exempt from registration tax, luxury tax
and luxury living tax. Electric and hybrid cars (with an engine capacity of
up to 1,549cc and first registration date before 31 October 2010) are
exempt from circulation tax.
Electric cars and plug−in hybrids are exempt from registration tax,
annual circulation tax and company car tax.
Electric vehicles qualify for VRT (purchase tax) reliefs of €5,000 until 31
December 2021 (€2,500 for plug−in hybrids until 31 December 2018). In
addition, electric vehicles and plug−in electric hybrids entitle the buyer to
a grant of up to €5,000 on purchase until 31 December 2021 for electric
vehicles and December 2018 for plug−in hybrid electric vehicles.
Electric vehicles pay the minimum rate of the road tax (€120).
Electric vehicles are exempt from the annual circulation tax (ownership
tax) for a period of five years from the date of the first registration. After
this five‐year period, they benefit from a 75% reduction of the tax rate
applied to the equivalent petrol vehicles.
Pure electric vehicles pay the lowest fee for technical annual inspections
and the lowest amount for the company car tax (€10).
Electric and fuel cell vehicles benefit from a tax allowance on the
registration fees of €5,000. Electric vehicles also pay the minimum rate
Vujadinovic et al.
of the annual circulation tax.
Pure electric and hydrogen cars pay the lowest tax on benefit in kind for
private use of a company car.
Registration tax is based on length of vehicles, emissions and age. For
pure electric vehicles the emission tax is zero.
Zero emission cars are exempt from paying registration tax. Passenger
cars with zero CO2 emissions are exempt from motor vehicle tax up to
and including 2020.
Zero emission cars pay the lowest percentage (4%) of the income tax on
the private use of a company car.
Electric vehicles are exempt from the registration tax (Imposto Sobre
Vehículos or ISV) and from the annual circulation tax. Hybrid vehicles
only pay 25% of the registration tax.
VAT is deductible for electric vehicles (with acquisition cost <€62,000)
and plug‐in hybrids (with an acquisition cost<€50,000).
Pure electric cars are exempt from the registration tax (Imposto Sobre
Vehículos or ISV). Plug‐in hybrid cars with all‐electric mode up to 25km
benefit from a 75% reduction of the tax.
An incentive scheme grants €10,000 for the purchase of a new pure
electric vehicle (plus €1,500 for scrapping a vehicle older than eight
years) and €4,500 for the purchase of a new hybrid vehicle. Electric and
hybrid vehicles are exempt from the registration tax. Electric vehicles are
exempt from the ownership tax.
Pure electric vehicles pay the lowest amount for the registration tax
(€33) and are exempt from motor vehicle tax. Hybrids and natural gas
(CNG) vehicles benefit from a 50% reduction of the annual circulation
An incentive scheme grants:
€7,500 for a new electric vehicle with zero emissions or a BEV
€4,500 for a new electric vehicle with zero emissions or a
power‐driven vehicle (N1 or L7e)
€4,500 for a new plug‐in hybrid or a new electric vehicle with a
range extender, with emissions < 50g CO2/km (M1 or N1)
€3,000 for a new electric vehicle with zero emissions or a
power‐driven vehicle (L6e)
€1,000 for a new electric vehicle with zero emissions (L3e, L4e
€500 for a new electric vehicle with zero emissions (L1e‐B or
€200 for a new electric vehicle with zero emissions (L1e‐A)
BEV's pay the lowest (0,5%) rate of tax on motor vehicle
Main city councils (e.g. Madrid, Barcelona, Zaragoza, Valencia etc.) are
reducing the annual circulation tax (ownership tax) for electric and
fuel‐efficient vehicles by 75%. Reductions are applied on company car
taxation for pure electric and plug‐in hybrid vehicles (30%), and for
hybrids, LPG and CNG vehicles (20%).
‘Climate bonus’ (Klimatbonus) is available for the purchase of new
vehicles with CO2 emissions of maximum 60g/km. It ranges from SEK
60,000 for electric vehicles (BEV) with zero emission to plug‐in hybrids
(PHEV) with emission of 60g/km.
Electric cars and plug‐in hybrids are exempted from paying annual
Paper title, lower case (9 pt Italic)
circulation tax for five years. 40% reduction is applied on company car
taxation for electric cars and plug‐in hybrids.
From April 2018 until March 2021, cars that emit less than 50g/km
qualify for 100% first year writing down allowances (FYAs). Zero
emission vehicles attract a zero rate of vehicle excise duty (VED)
Ultra‐low emissions and electric vehicles pay reduced company car tax
Source: ACEA – European Automobile Manufacturers Association: https://www.acea.be/uploads/publications/EV_incentives_overview_2018_v2.pdf
(25.02.2019.) and https://insideevs.com/overview-of-incentives-for-buying-electric-vehicles-in-eu-2016-edition-by-acea/
3. INCENTIVES FOR ELECTRIC VEHICLES IN NORWAY
Norway’s global leadership role in the promotion of electric vehicles (EVs) is
due to early and comprehensive policy interventions targeting both the monetary
aspects of vehicle purchases as well as aspects related to the ease of use of low and
zero-emission vehicles (ZEVs). By 2025, all new passenger road vehicles sold in
Norway should be ZEVs according to a recent (non-binding) decision by the Norwegian
government. Already today, close to 40% of new vehicles purchased in Norway are
EVs, either Plug-In Hybrid Electric Vehicles (PHEVs) or Battery Electric Vehicles
(BEVs), and more than 50% of other hybrids are included in this estimate.
The history of advertisement and promotion of EVs in Norway dates back to the
late 1980s when an exemption from the registration tax was granted that allowed
testing of BEVs (Norsk Elbilforening, 2017). Based on these incentives, the first market
niches were carved, which were municipal and utility fleets testing. Inspired by the
1990 California ZEV mandate that included an obligation to sell 2% of BEVs from
1998, 5% in 2001 and 10% in 2003, Norwegian stakeholders, such as its EV
association, started to set targets for the reduction of local pollutants and the
introduction of clean electricity into the transportation sector.
As Figure 2 shows, all in place incentives for the purchase of an electric car.
Figure 2: Perceived importance of Norway’s electric car support policies based on
survey results (Haugneland, Lorentzen, Bu, & Hauge, 2017)
Vujadinovic et al.
4. ASSESSMENT OF THE IMPACT OF INCENTIVES ON THE SHARE OF
ELECTRIC VEHICLES IN EUROPEAN COUNTRIES
After getting acquainted with the incentives that exist in European countries it is
interesting to see the data of the sale of electric vehicles, in order to compare the data
with incentives and determine the correlation between these two parameters.
Figure 3: The number of sold EVs in Europe 2018 with overview of the growth rate 
Every single country analyzed saw EV market growth. Germany led in terms of
volume growth, while Norway remains the continent’s biggest EV market — though,
much more populous Germany appears set to eclipse it. Germany saw 15% EV market
growth. Norway saw 9% EV market growth. The UK saw 6% EV market growth,
Sweden 5%, the Netherlands 5%, France 4%, and Spain 3%.
If we analyze the countries with the largest number of sold vehicles and the
incentives for electric vehicles that exist in these countries, a very strong correlation is
observed between these two parameters. Therefore, it can be concluded that the key
of fast electrification of road traffic in strong incentives. On the other hand, incentives
usually require large financial resources that need to be provided from a source, which
is not an easy job for the underdeveloped countries, so this balance should be taken
into account when defining incentives.
5. INCENTIVES FOR ELECTRIC VEHICLES IN MONTENEGRO
Currently, there are no measures of financial incentives for citizens and
companies for the procurement of electric vehicles in Montenegro. An important step in
establishing such incentives is the establishment of the Environmental Protection Fund
(hereinafter: Eco-Fund). By decision on the establishment of the Fund, Article 6 clearly
states that the funds of the Eco-Fund, among others, are used to encourage cleaner
traffic and the use of alternative fuels in traffic. The previous fact encourages that the
financial incentives from the Eco-Fund could first be established in the area of
subsidizing the procurement of electric vehicles.
Paper title, lower case (9 pt Italic)
Vehicle tax policy is defined in the Law on Tax on the Use of Passenger Motor
Vehicles, Naval Facilities, Aircraft and Aircraft ("Official Gazette of Montenegro", No.
28/04, 37/04, 86/09). The motor vehicle tax is paid annually according to the volume
of the engine for passenger motor vehicles, by the length and power of the craft engine
and by the number of seats for aircraft and aircraft. This tax is paid by legal and natural
persons who own the registered passenger cars, vessels, aircraft and aircraft,
according to the prescribed tariff. Revenues on this basis are entirely in the budget of
the State. Article 6 of the Law stipulates that for motor vehicles on electric power the
tax is not paid and this tax relief is the only financial incentive for e-vehicles and e-
mobility in general that currently exists in Montenegro.
From the domain of tax policy, it is possible to mention the Law on Turnover
Tax on Used Motor Vehicles, Vessels, Aircraft and Spacecraft ("Official Gazette of
Montenegro" No. 55/03), which defines that the buyer, ie the acquirer of used
passenger and other motor vehicles, vessels, aircraft and aircraft are obliged to pay a
tax of 5% of the estimated value of the vehicle. There are no exceptions to EVs.
The Croatian Environmental Protection and Energy Efficiency Fund provides
legal and natural persons with subsidies for the purchase of electric and plug-in hybrid
vehicles, and the current amount of subsidies is shown in Table II. In addition to
vehicles, the Croatian Fund also provided subsidies for electric bicycles in 2018 in the
amount of HRK 5,000 (about EUR 675), while in 2014 and 2015 it also provided
subsidies of up to 40% for legal entities for installing filling stations for electric vehicles.
This opportunity was used by numerous cities and municipalities to set up e-vehicle
chargers in public places.
In the Republic of Slovenia, the Slovenian Public Environmental Fund (Eco
Fund) offers subsidies for the purchase of electric and plug-in hybrid vehicles for both
citizens and legal entities from the business and public sectors.
Previous examples from countries in the region can subserve as a good
example of incentive measures for other countries of the Western Balkans.
There are currently no financial incentives for the purchase of EVs and the
development of infrastructure in Montenegro. There is only a fiscal stimulus, in terms of
exemption from paying taxes on the use of passenger motor vehicles. The reason for
the lack of adequate incentives is the fact that in 2018, of the 235,385 registered
vehicles, only 106 EVs or 0.045% were registered. It is expected that the current
situation will change with the beginning of the operational work of the Eco-Fund.
By analyzing the incentives for individual European countries and the
representation of electric vehicles in the fleets, there is a correlation between these two
parameters. What is the practice of countries that are far ahead of Montenegro in this
area to encourage the purchase and use of electric cars as this category does not
reach 1% in the national fleet of vehicles. Bearing in mind the current state, it is
necessary that the number of electric vehicles grows more than 20 times, which
requires incentives. A particularly interesting example of Norway is the leader in the
sale of electric vehicles in recent years, but given the difference in the level of
development of countries, GDP, as well as the purchasing power of the population, it
should be realistic and moderately optimistic and be very careful when deciding on
incentives, financial incentives that will be dominantly based on the current Eco-Fund.
Vujadinovic et al.
A similar situation in this area is in other countries of the former Yugoslavia in
the Western Balkans, which are at the same level of development as Montenegro, so
the decision on subsidies for electrification of road traffic is just ahead. A careful
selection of incentive measures based on the experiences of the European countries
that have already passed through this process is recommended..
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