Denmark, Tesla face off

Tesla has threatened to take the Danish government to the European Union Court after the country announced plans to phase out electric-car tax breaks.

The government last week agreed to phase the tax support for electric cars out over the next five years, which will see the price of both battery-electric cars and plug-in hybrids skyrocket.

Tesla will be particularly hard hit, with its Model S P85D jumping from its 875,000 kroner ($A182,870) price today to 1,807,000 kroner ($A378,000) in 2020, when the tax break no longer applies.

Tesla has excoriated the government for introducing a plan that was anti-competitive and signaled the "death knell" of the electric-car industry.

The Danish government fought back, though, insisting that by not applying its usual 180 per cent registration tax to electric cars, which were bought by 1240 Danes in the first half of 2015, it was losing 650 million kroner ($A135 million) a year.

"The new plan balances the needs for the continued expansion of electric cars in Denmark, the public purse and fairness within the automobile market," Danish Tax Minister Karsten Lauritzen said.

"Electric cars have for a long time been better positioned than other cars by being completely exempt from registration tax.

"Many regular Danes have a hard time understanding why they should pay the full registration tax for their regular cars while those who can afford an electric car have gotten off completely free," he explained.

That didn’t wash with Tesla, whose Model S is the small country’s best selling car.

"All things being equal, this is not a phasing in of levies on electric cars but rather a phasing out of electric cars in Denmark," Tesla’s Danish spokesman Esben Pedersen said.

Insisting the tax change was unfair, he went on to say it would be challenged in the EU court.

"We will contact the EU because we believe that the electric car agreement is anti-competitive and singles out Tesla. The deal will hit the entire electric car model and will eliminate it instead of developing it," he said.

The Danish Tax Ministry calculated that while the prestige Model S would jump in price, more humble electric cars wouldn’t receive quite as big a shock.

The Nissan LEAF would rise from 275,000 kroner ($A57,750) to 352,000 ($A74,000), the VW e-Golf would rise from 286,000 ($A60,000) to 334,000 ($A70,000), while Volkswagen’s e-Up would actually drop from 186,000 ($A39,000) to 171,000 ($A36,000) by 2020.