New carbon tax hits the brake on Swedish car sales

4:46 min

A new bonus for electric cars and plug-in hybrids, combined with higher annual vehicle tax for most petrol and diesel cars, has led to a jerky few months in Swedish car sales.

"We saw an increase in sales, and then we saw a drop. A very drastic drop," says Anders Norén, at the organisation Bil Sweden, which represents manufacturers and importers of cars in this country.

Many of the new diesel and petrol cars that are registered in Sweden after the July 1 will now come with a much higher annual vehicle tax. For a mid-range car the tax will often double or even quadruplet for the first three years. Owners of cars that emit more CO2 per kilometre will have to pay more.

This has affected the car sales, which saw a real jump up June, and then a significant drop. Car sales in September was down by 40 percent compared to the same month last year.

For cars with low or no CO2 emissions, like electric cars or plug-in hybrids, there is instead a bonus of up to SEK 60,000. Last year 5.4 percent of the cars sold in Sweden were chargeable, and the industry expects that to go up to 9.4 percent this year.

Sweden's official target is to have a car fleet that is independent from fossil fuels by 2030. The hope is that the new tax system will help along the way.