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Electric cars account for over 40% of new car sales in Iceland, driven by tax incentives, cheap geothermal electricity, and a growing charging network. Here is what residents need to know about buying and owning an electric car in Iceland.
Helping you navigate your move and settling in the land of fire and ice.
F-roads are Iceland's unpaved highland routes, open only in summer and restricted to 4x4 vehicles. Key routes, opening dates, river crossing safety, and the rules that apply.
A practical guide to winter driving in Iceland covering tire laws, vehicle choice, road closures, wind hazards, emergency resources, and the 2026 kilometer road tax.
A practical guide to public transport in Iceland, covering the Strætó bus network, fares, intercity routes, airport transfers, domestic flights, cycling, and what it takes to live in Iceland without a car.
Iceland has one of the highest electric vehicle adoption rates in the world. In 2025, fully electric cars accounted for roughly 41% of all new car sales, placing Iceland among the top EV markets in the world alongside Norway. For anyone moving to Iceland and planning to buy a car, an electric car in Iceland is not an alternative choice. It is the mainstream one.
The reason is straightforward. Iceland generates virtually all its electricity from geothermal and hydropower sources. Charging an electric car here costs a fraction of what it costs in most of Europe. Combined with government tax incentives and a well-developed charging network, the economics strongly favour going electric.
The incentives, the costs, the charging network, and the practical realities of owning one here all point in the same direction.
The Icelandic government has actively promoted electric vehicles since the early 2010s. The incentive structure has evolved over the years, but as of 2026, several meaningful benefits remain.
VAT exemption (capped). Iceland's blanket VAT exemption on electric vehicles ended in January 2024. It was replaced by a capped exemption: fully electric vehicles (BEVs) and hydrogen vehicles are exempt from VAT on the first 1,440,000 ISK of the purchase price (as of 2025). Plug-in hybrids (PHEVs) receive a smaller exemption of up to 960,000 ISK. Above these thresholds, the standard 24% VAT applies. EV incentive policy in Iceland has changed frequently, so confirm current terms on island.is before purchasing.
Energy Fund grants. Buyers can apply for a tax-free grant of 400,000 to 900,000 ISK through Orkusjóður (the Energy Fund) for purchasing an electric car. Vehicles priced above 10 million ISK are not eligible.
No registration tax. Fully electric and hydrogen vehicles are exempt from the registration tax (vörugjald) that applies to conventional cars. This is a significant saving, as import duties and registration taxes are a major reason cars cost more in Iceland than in mainland Europe.
Reduced road fees. Since January 1, 2026, Iceland has replaced traditional fuel taxes with a universal kilometre-based road fee of 6.95 ISK per kilometre for all passenger cars. Before this reform, electric vehicles paid a lower per-kilometre rate (introduced in 2024). The universal fee levels the playing field, but electric car owners still benefit from the VAT and registration exemptions.
Cheap electricity is the single biggest advantage of owning an electric car in Iceland. The country's geothermal and hydropower grid means residential electricity rates are among the lowest in Europe.
Most electric car owners charge at home overnight. Residential electricity in Iceland costs approximately 25 to 30 ISK per kWh (as of mid-2025), including distribution fees. For a typical electric car with a 60 kWh battery, a full charge from empty costs roughly 1,500 to 1,800 ISK, or about 10 to 13 USD.
In practice, most people top up rather than charge from zero. A typical weekly home charging cost runs 1,000 to 2,500 ISK depending on driving habits, which is dramatically cheaper than filling a petrol tank.
Installing a home wall charger (typically a 7 to 22 kW unit) costs 100,000 to 200,000 ISK including installation. Many apartment buildings in Reykjavik have added shared charging points, though availability varies. If you rent, check with your landlord about charging options before committing to an electric car.
Iceland has two major public charging networks.
Ísorka operates the largest network, with over 3,000 charging points across the country. They offer a mix of AC (22 kW) and DC fast chargers (50 to 250 kW), accessible through their app.
ON Power (Orka náttúrunnar) runs over 130 public chargers, including ultra-fast stations (up to 250 kW) in the Reykjavik area and along major routes.
DC fast charging at public stations typically costs 50 to 75 ISK per kWh (as of 2025). A full fast charge on a 60 kWh battery runs roughly 3,000 to 4,500 ISK. Iceland is one of the cheapest countries in Europe for public EV fast charging, at approximately 2.90 EUR per 100 km.
Petrol in Iceland costs roughly 200 to 215 ISK per litre (as of March 2026). A typical petrol car consuming 7 litres per 100 km costs about 1,400 to 1,500 ISK per 100 km. An electric car consuming 18 kWh per 100 km on home electricity costs about 450 to 540 ISK for the same distance. That is roughly a third of the petrol cost.
Over a year of average driving (12,000 to 15,000 km), the fuel savings alone can reach 100,000 to 150,000 ISK.
Range anxiety is less of a concern in Iceland than you might expect. The Ring Road (Route 1) has DC fast charging stations spaced within roughly 100 km of each other. Most towns along the route have at least one charging option.
The capital region (Reykjavik, Kópavogur, Hafnarfjörður, Garðabær) has dense coverage, with charging points at shopping centres, parking garages, and petrol stations. Akureyri and other larger towns in the north and south also have multiple charging locations.
Coverage in the Westfjords and parts of the East is thinner but improving. If you live or travel in these areas, plan your charging stops. Both the Ísorka app and A.is (the Icelandic Automobile Association) provide charging maps with real-time availability.
The Icelandic electric car market follows European trends, with a few local favourites.
Tesla Model Y and Model 3 have dominated sales in recent years. Tesla's Supercharger network in Iceland adds to their appeal, though the network is now open to other brands at most locations.
Hyundai Kona Electric and Kia EV6 are popular mid-range options. Both offer good range (400+ km rated) at a lower price point than Tesla.
The Volkswagen ID.4 and Skoda Enyaq have gained traction among families looking for a practical electric SUV. Volvo EX30 and EX40 models are also increasingly common.
For used electric cars, the Nissan Leaf remains widely available and affordable, though its shorter range (around 200 to 270 km depending on model year) means it works best for city driving and shorter commutes.
The used electric car market in Iceland is active. Used imports account for a significant share of EV registrations, with many vehicles coming from Norway and mainland Europe.
The main platforms for buying used cars (electric or otherwise) are bland.is and bilasolur.is, both of which list private and dealer inventory. Dealerships across the country also carry used EVs. Our car marketplace connects you directly with dealerships.
When buying a used electric car, pay attention to battery health. Icelandic winters are cold, and batteries degrade faster in extreme temperatures over time. Ask for the battery health report (state of health percentage). Most modern EVs retain 85 to 90% battery capacity after 100,000 km, but older models like early Nissan Leafs can show more degradation.
For the full buying process, including registration, inspection, and financing, see our guide to buying a car in Iceland.
Iceland's climate is the biggest practical challenge for electric car owners. Cold temperatures reduce battery range, and winter conditions demand extra preparation.
Expect 15 to 25% range loss in freezing conditions compared to mild weather. At temperatures around minus 5 to minus 10 degrees Celsius (common from November through March), a car rated at 400 km of range may deliver 300 to 340 km in practice. Cabin heating draws additional energy. Using seat heaters instead of blasting the cabin heater helps conserve range.
Pre-conditioning the car while still plugged in (warming the cabin before you unplug) is the most effective way to preserve range on cold mornings. Most modern EVs support this through their app.
Winter tires are mandatory in Iceland from November 1 to April 15. Studded tires are legal during this period and common on Icelandic roads. They provide excellent grip on ice but increase rolling resistance slightly, which can reduce range by another 5 to 10%.
For more on winter driving preparation, see our winter driving guide.
Electric cars cannot access Iceland's highland F-roads. F-roads require four-wheel-drive vehicles, and the remote, unpaved terrain is unsuitable for most EVs (which tend to have lower ground clearance and no spare tire). Even all-wheel-drive EVs are not practical for F-roads due to the lack of charging infrastructure in the highlands and the risk of getting stranded.
If you plan to explore the interior, you will need a separate vehicle or a rental. For daily life and Ring Road travel, an electric car covers everything you need.
If you are bringing a car from abroad rather than buying locally, the process follows Iceland's standard vehicle import procedure. You will need to:
Apply for pre-registration with the Icelandic Transport Authority (Samgöngustofa) before customs clearance. Processing takes 3 to 4 business days for vehicles with a Certificate of Conformity (CoC), or at least 10 business days otherwise.
Submit a customs declaration through Icelandic Customs (Tollstjóri) once pre-registration is complete.
Pay applicable fees: battery and tire recycling charges apply. Fully electric vehicles are exempt from registration tax and receive the capped VAT exemption described above.
Complete a vehicle inspection before final registration.
The key advantage for EVs is the registration tax exemption and VAT cap, which can save hundreds of thousands of ISK compared to importing a petrol or diesel vehicle.
For most people moving to Iceland and settling in or near Reykjavik, an electric car is the practical default. Cheap electricity, strong incentives, and good urban charging infrastructure make the economics hard to beat.
An electric car makes less sense if you live in a very remote area with limited charging access, if you need highland access regularly, or if you cannot charge at home and have no reliable workplace charging.
For a broader overview of the car buying process, costs, and what to expect, see our guide to buying a car in Iceland. For information on other transport options, read our public transport guide. And for a full picture of living costs including transport, visit our cost of living calculator.
For everything else about relocating, our moving to Iceland guide covers the full process from visas to settling in.
Home charging costs roughly 25 to 30 ISK per kWh, making a full charge on a 60 kWh battery about 1,500 to 1,800 ISK (10 to 13 USD). Public DC fast charging runs 50 to 75 ISK per kWh. Either way, it is significantly cheaper than petrol.
Yes, for most driving patterns. The Ring Road has fast chargers spaced within about 100 km of each other, and the capital region has dense coverage. The Westfjords and remote eastern areas have fewer stations, so plan ahead if travelling there.
Fully electric cars are exempt from registration tax and may qualify for an Energy Fund grant of 400,000 to 900,000 ISK. A capped VAT exemption on the first 1,440,000 ISK of the purchase price has also been available, though EV incentive policy changes frequently. Check island.is for the latest terms. These incentives make a meaningful difference given Iceland's normally high car prices.
No. F-roads require four-wheel-drive vehicles, and the highlands have no charging infrastructure. Even all-wheel-drive EVs are not suitable for F-road conditions. You will need to rent or borrow a capable 4x4 for highland driving.
Expect 15 to 25% range reduction in winter. A car rated at 400 km may deliver 300 to 340 km in freezing conditions. Pre-conditioning the car while plugged in and using seat heaters instead of cabin heating helps. For daily commuting and town driving, winter range loss is manageable.
Last updated: March 2026
