Why Tesla sales are rebounding in Norway while Europe lags

Tesla's sale of new cars in Norway skyrocketed 213% in May from a year ago, according to official registration data, bucking a downward trend across Europe.

Tesla car sales in Norway jumped to 2,600 last month, data from the Norwegian Road Federation (OFV) showed on Monday, up from 832 over the same period a year earlier. The increase was primarily driven by sales of the firm's revamped Model Y compact sport utility vehicle.

The U.S. electric vehicle (EV) maker's European sales have recently suffered from a sharp decline amid reputational damage, in large part due to CEO Elon Musk's incendiary rhetoric and political activities.

Industry groups on Monday reported significantly lower May sales for new Tesla vehicles in Spain, Portugal, Denmark and Sweden.

Christina Bu, secretary general of the Norwegian EV Association (NEVA), which represents electric car owners in the country, said the Tesla Model Y appeared to be popular nationwide, noting that the automaker's recent price campaigns.

"The Tesla Model Y has sold well and is popular in Norway, likely because it is good value for money and because it meets Norwegians' needs for large luggage space, high ground clearance, all-wheel drive, and a tow hitch," Bu told CNBC via email.

In a recent NEVA survey of more than 15,000 EV drivers, however, Bu said that the majority of respondents said that politics does influence their choice of car brand.

"As many as 43 percent stated that they would not buy a Tesla for political reasons. We can therefore only speculate how much Tesla would have sold without Musk's support for the MAGA movement and the Trump administration," Bu said.

Last week, the European Automobile Manufacturers' Association, or ACEA, reported a 49% drop in overall European sales of Tesla vehicles in April, citing rising competition and brand damage.

Musk spent nearly $300 million to the campaign for the re-election of U.S. President Donald Trump, and he has also led an initiative for the Trump administration to slash federal agencies. Protests erupted at Tesla dealerships across Europe in response.

Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, described Tesla's latest monthly car sales data in Norway as "quite remarkable," noting that last month's figures in the Netherlands also showed a month-on-month bounce back.

"In Norway EV-incentives are still abundantly available, making it almost a no-brainer to buy a BEV if possible. This is a general benefit, but this has also contributed to this surge," Luman told CNBC by email.

Norway has long been recognized as a global leader in sustainable transportation, and it is currently on track to become the first country in the world to effectively erase gasoline and diesel cars from its new car market.

Lawmakers and analysts have attributed the country's shift away from internal combustion engine (ICE) vehicles to long-term and consistent policies designed to support the uptake of EVs.

Some of Norway's EV incentives include a VAT exemption, discounts on road and parking taxes and access to bus lanes. The government has also heavily invested in public charging infrastructure, and many Norwegian households are able to charge their cars at home.

ING's Luman attributed Tesla's rebound in new car sales in Norway to the firm's revamped model Y SUV, suggesting that a first batch of deliveries appears to have taken place in May, with more coming in June.

"This also shows that customers pushed back new Tesla orders to await the new edition, explaining part of the setback in the first months of the year," he added.

Tesla continues to battle rising competition from traditional automakers, as well as Chinese players. Auto giant BYD, for instance, was recently found to have sold more pure electric cars in Europe than Tesla for the first time.

Rella Suskin, equity analyst at Morningstar, said that there appears to be a strong correlation between the market share of Chinese car brands across Europe and battery EV adoption rates.

"In fact, Norway has the highest battery electric vehicle adoption rate as well as the highest share of Chinese vehicles, excluding Russia. This could correlate with the pick-up of Tesla's in the region, as we can see there is a clear market demand for electric cars," Suskin told CNBC over email.

— CNBC's Arjun Kharpal contributed to this report.