This Country Is Planning to Ban Cars That Run on Fossil Fuels

A CarMax Dealership Ahead Of Earnings Figures
Customers shop for used vehicles displayed for sale outside of a CarMax Inc. dealership in Burbank, California, U.S., on Tuesday, June 17, 2014. CarMax Inc. is scheduled to release earnings figures on June 20. Photographer: Patrick T. Fallon/Bloomberg via Getty Images
Photograph by Patrick T. Fallon — Bloomberg via Getty Images

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Tiny oil rich Norway might be the last country one would expect to give a huge boost to Tesla (TSLA), yet it appears that the wealthy Nordic nation is poised to make a dramatic change that could be the start of a trend. Norwegian legislators are reportedly preparing to ban or at a minimum significantly reduce the allowable sales of cars and trucks that run on fossil fuels by 2025 – less than a decade from now. That policy, while designed to help combat climate change and usher in a future of emissions free vehicles, is a huge boost to the company most closely associated with those vehicles today—Tesla.

Elon Musk tweeted out a copy of a newspaper headline from Norway which broke the news. Norway didn’t set out to help any particular company, but it’s clear that the policy does help companies like Tesla at the expense of the old guard. Moreover, where Norway leads, other wealthy European nations, like Switzerland, Ireland, and Denmark, may follow.

Øyvind Korsberg, an MP for the Progress Party, explained how far-reaching the consequences of the new plan could be. “After 2025 new private cars, buses and light commercial vehicles will be zero-emission vehicles. By 2030, new heavier vans, 75 percent of new long-distance buses, 50 percent of new trucks will be zero emission vehicles,” he said, referring to the targets stated in the white paper on the energy policy mapped by the Norway’s Petroleum and Energy Ministry in April.

All of this is a longer-term boost for Tesla that does very little for sales right now, but these types of actions do make it clear that electric cars are more than just a temporary fad. They appear to be here to stay.

To be fair of course, Norway has a very small automotive market with only about 150,000 cars sold in the country last year. Nonetheless, 150,000 cars that were all electric would be a meaningful slice of demand for Tesla. It’s little wonder then that Elon Must hailed the decision and Norway as an “amazingly awesome country”.

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For Tesla, which is the world’s most iconic manufacturer of electric cars, Norway is one of the most attractive markets. That is largely because the country offers generous incentives and rebates related to electric vehicles and the country is a leader consumer of environment-friendly products.

In February, Norwegian Petroleum and Energy Minister Tord Lien asked Tesla to participate in working on a more efficient energy system for the country in return for Norway’s steady support of Tesla’s products saying “Norway has always been important for Tesla, and I think it is only fair if the company also gives something in return”.

Tesla continues to be a very controversial stock given its valuation and the relative size of its competitors. Despite that, the Norwegian news is unambiguously positive. Assuming that the plan goes through as expected, if Tesla captures a 25 percent market share, it would equate to roughly 37,500 vehicles per year in Norway.

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That’s not a lot in comparison to Ford or GM, which sell millions of vehicles, but it is significant against Tesla current project sales for the year and its expected sales in the next five years. For Tesla shareholders then, Norway’s move is a welcome development indeed.

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