With a population of just 5.1 million people, the entire country of Norway contains 40% fewer people than does New York City alone. It's not often that such a small country dominates global headlines -- but last week, Norway did it.


News that Norway might ban gas-powered cars sent the creator of the Tesla Model S into fits of Twitter ecstasy this week. Image source: Tesla Motors.

Multiple news outlets reported last week that Norway's parliament is cobbling together legislation to ban the sale of all gasoline-powered automobiles by 2025. If true, this would be an acceleration of a previously planned ban, sponsored by Norway's Labor Party, which called for an end to the sale of gas- or diesel-powered cars by 2030. According to Norwegian newspaper Dagens Naeringsliv, the country's Democratic Party and Liberal Party are both on board with Labor's proposed ban, while the more conservative Progress Party is at least considering the move.

In fact, English-language reports on Norway's legislation do not appear to be true -- or at least not entirely accurate. According to the original report in Dagens Naeringsliv, which publishes only in Norwegian, what Norway is actually looking to do is pass legislation to encourage car buyers to buy more zero-emission cars and trucks (ZEVs) by 2025, with a plan to reduce purchases of non-ZEV vans, trucks, and buses by 2030. The aim, says Liberal Party deputy Ola Elvestuen, is to convince car buyers "that it will be significantly cheaper [to buy a zero-emissions vehicle] than a traditional car," and then allow them to make the logical choice.

Lost in translation

So as it turns out, what Norway is planning is less of a "ban" on gas-powered cars and more of a "suggestion" to buy ZEVs instead. But even so, Elvestuen avers that there is a "broad consensus ... among the four parties" to try to accelerate the switch to ZEVs. That alone is news.

Caveats and confusion over the translation notwithstanding, news that Norway is even considering the legislation elicited an enthusiastic tweet of endorsement from Elon Musk, CEO of electric car company Tesla Motors (TSLA 2.72%). Tweeted Musk this week: "What an amazingly awesome country. You guys rock!!"

Rocking the green revolution

In fact, Norway has been "rocking" for quite some time. Already, nearly 1 in 4 Norwegians drives an all-electric or hybrid-electric car -- a trend encouraged by the fact that Norway gets 99% of its electricity from cheap hydropower, and is covering future electric needs with increased deployments of wind farms.

Even if Norway is not contemplating an actual legislative ban on the sale of gas- and diesel-powered cars, the growing political consensus that zero-emission is the way to go means the number of electric-car buyers in Norway is only likely to grow.

So... which car companies can investors expect to benefit most from this trend?

Elon Musk clearly hopes that Tesla will be the primary beneficiary, and indeed, Tesla has enjoyed some significant success tapping into the Norwegian market for "green cars." Last year, Statista.com data ranked Tesla as Norway's 14th biggest car seller, outselling such well-known brands as Honda, Hyundai, and Subaru. But Tesla isn't the only winner from Norway's love of green vehicles -- nor even the most successful.

In fact, according to the most recent data available from bestsellingcarsblog.com, as of April, Volkswagen (VWAGY 0.90%) retains top market share in Norway, with 21.4% of the market. Toyota (TM 3.84%), with 10.1%, and BMW (BAMXF 0.56%), with 7.5%, round out the top three. Tesla, meanwhile, saw its Norway sales slide 58% in April -- perhaps because buyers are holding off on Model S purchases in expectation of soon being able to buy a Tesla Model III for less than half the cost...

And here, at last, are Norway's five top-selling cars

Model-wise, Norway's five most popular cars are hybrid and all-electric variants of Volkswagen's Golf, conventionally powered Golfs, Nissan's all-electric Leaf, the hybrid Mitsubishi Outlander, and the hybrid Toyota Auris -- in that order.

Admittedly, the absolute numbers of electric and hybrid vehicles being sold are small. Norway's top-selling car in April, the e-Golf, moved only 1096 units. But that's only to be expected in such a small market. What's more important for investors, I think, is to view Norway as perhaps a leading indicator of which brands might sell best in larger countries, as they, too, move down the all-electric trail that Norway is blazing.

Because even if Norway isn't banning the sale of gas-powered cars, that's clearly the direction they're heading.