New taxes threaten Tesla sales in key European markets

Tesla makes handsfree driving a reality
Tesla makes handsfree driving a reality

Scandinavians love Teslas and other electric cars, but major tax hikes could soon sour the relationship.

New taxes are about to make electric cars very expensive in Denmark, and Norway is considering a similar policy move that could put a big dent in sales of electric Tesla (TSLA), Nissan (NSANY) and BMW (BAMXY) vehicles.

Together the countries account for about 10% of Tesla's global car sales.

On January 1, Denmark will make the first move by phasing in sky-high registration taxes on zero-emissions vehicles. Once the tax hikes are complete in five years, the cost of a Tesla Model S will jump to about $280,000 from around $100,000 today.

The tax increases would eventually eliminate the price advantage electric cars have had over fuel-powered cars.

This tax is bad news for Tesla -- the Model S is the most popular electric car in Denmark. The automaker sold 849 vehicles to Danish customers in the first nine months of the year, according to market intelligence firm LMC Automotive.

But things could get even worse.

An expert panel of Norwegian economists and legal professionals called last week for the government to phase in new taxes on electric and hybrid vehicles.

"This preferential treatment of electric cars is heavily debated. There isn't any universal agreement that the system should be as generous as it is today," said Lars-Erik Borge, the lead economist behind the new tax policy recommendations.

Tesla has sold over 3,600 cars in Norway so far this year -- a big chunk of the 50,000 vehicles the company expects to sell globally in 2015. And it has acknowledged the risk of losing generous tax breaks in the country.

"If such government programs are reduced or eliminated, or the available benefits thereunder are exhausted earlier than anticipated, sales of all electric vehicles, including our Model S, could be adversely affected," Tesla said in its most recent annual report.

But a Tesla spokesperson said any tax changes would not deter the company from its "mission to put more electric cars on the road."

The Norwegian government is considering the panel's tax recommendations and is expected to decide whether to accept them in October 2016.

Related: Norwegians love Tesla more than Americans

Experts think a change in the tax rules is bound to happen sooner or later.

"I think [Norway] will eventually follow the Denmark model," said Al Bedwell, a director at LMC Automotive in the U.K. "They're losing huge amounts of revenue."

Still, Tesla competitor Nissan seemed unconcerned about the upcoming tax hikes in Denmark.

"We don't feel there will be a sizeable impact [on] a pan-European basis," said Gareth Dunsmore, director of Nissan's electric vehicle business in Europe.

"We'll continue to push forward regardless of what individual governments are doing," he said.

The driving stunt even Steve McQueen couldn't pull off
The driving stunt even Steve McQueen couldn't pull off

Thankfully for Tesla, Nissan and their rivals, other countries across Europe and North America continue to offer electric car incentives, though they're less generous than the current Norwegian system.

Many European countries grant customers a discount of 5,000 euros ($5,500) for each electric car as they try to encourage them to drive cleaner vehicles.

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