25% VAT is normal in Europe. To be part of the EU or EEA you have to have VAT between something like 20% and 25%, I forget the exact numbers. It's on the high end, but not massively out of whack with what most Europeans pay in tax on cars.
As for it being a "small" country, it is physically large and has a fairly hostile climate. That makes it good for stress testing EVs, and they have proven to cope better than fossil fuel powered cars. In particular, EVs offer much better comfort in terms of things like climate control and noise levels, as well as driving better in low grip situations. Some of them charge faster than you can refuel a fossil too.
Most EVs in Norway are not made there, they are imported from elsewhere in Europe, or from China. There is no shortage of vital materials. The issues in the US seem to be largely because of Trump's tariffs and China's reciprocal limits on exports of rare earths there.
It's getting to the point in Norway where it's inconvenient to need fossil fuels. Pumps are being ripped out and replaced with EV chargers and battery swap stations.