If the future of cars is electric, Norway is the place to assess how that might look. On a stroll along the streets of Oslo, it's easy to notice the large number of Teslas zooming past.

Norway is, in fact, Tesla's largest market in Europe. The American car maker shipped more than 8,600 cars to the Scandinavian nation last year, a number expected to rise sharply this year when the first Model 3s are delivered to customers.

And it's not just Tesla. 2018 was another record year for zero-emission vehicles in Norway: These include not only battery-powered electric vehicles (BEV) like the Tesla Model S or Nissan Leaf, but also cars that produce their own electricity from an onboard hydrogen fuel cell.

Of all newly registered cars in Norway last year, nearly a third were zero-emission vehicles (EV), compared to 21 percent a year earlier.  Sales of these cars have risen by 40 percent compared to 2017, reported the Road Traffic Information Service (OFV). Out of a total of 2 million cars on the road in Norway, 10 percent are now EVs.

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By comparison: Germany also saw record-breaking year for EVs, with a 43 percent sales increase. However, only 1 percent of new cars sold in Europe's number one economy in 2018 were fully electric.

Incentives make EVs cheaper

Norway's success comes down to generous government incentives both nationally and locally. Firstly, there is no VAT and no purchase tax on a fully electric vehicle. Thus, an electric Volkswagen eGolf costs a lot less than the regular, petrol-fueled Golf.

Secondly, municipalities across the country woo EV drivers with free parking, free charging and in some cases also allow them to use bus lanes. Finally, regular cars have always been expensive in Norway, which meant the government didn't have to raise taxes on polluting cars sharply to make EVs cheaper.

"Norway's EV policies have become something our politicians are proud of,” says professor Marianne Ryghaug of the Norwegian University of Science and Technology (NTNU). "We're becoming a sandbox for experimenting with electrified transportation, which pushes the supplying industries to innovate further and to continually improve the user experience.”

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Perhaps one of the most striking statistics illustrating Norway's EV success is that the total new car sales shrank by 7 percent. A lot of customers are holding off on a new purchase until the EV of their choice is available, said the OFV.

‘Sooner or later, benefits must be scaled down'

The current center-right cabinet of Prime Minister Erna Solberg has vowed to keep the main tax incentives in place until the next elections in 2021. Slowly, however, some of the minor incentives will have to be scrapped.

Oslo, for instance, decided to limit bus lane access for EVs after bus drivers started complaining about too many electric cars clogging up the lane. EV drivers can now only use the designated lanes when they are not alone in their vehicle.

A more significant shift came at the beginning of this year when an exemption on highway tolls ended. Now, drivers of electric cars are charged up to half of the amount paid by conventional vehicles. This amount will gradually increase over the next few years.

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"As we get more electric cars on the roads, sooner or later the benefits must be scaled down,” county councilor Annette Solli told Norwegian public broadcaster NRK. Her county of Akershus was closely involved in the changes since the region surrounding Oslo has one of the highest densities of EVs in Norway.

That said, the time certainly hasn't come yet to get rid of them altogether, she added: "It clearly is a tool that works. We get more zero-emission cars, which is really important. I do not think the time has come to end the incentives before we are where we want to be.”

Where Norway wants to be is ambitious: By 2025 no new car sold will be allowed to have an internal combustion engine. But with plenty of new models coming to the market in 2019 — including the Audi e-tron and Tesla Model 3 — this year will most likely post another sales record.