Australia's EV market has moved quickly in 2026. Battery electric vehicles (BEVs) made up 16.5% of new vehicle sales in the first half of the year, almost double the 8.3% recorded across 2025.
While the recent spike has largely been driven by surging fuel prices, with more buyers turning to EVs to cut their running costs, it isn't the only factor. The tax benefits available through a novated lease have also been a major draw. But with changes due from April 2027, what could that mean for EV sales?
How much is the Electric Car Discount driving EV sales?
The Electric Car Discount removes fringe benefits tax (FBT) from eligible EVs provided through salary packaging or company fleets. For employees, that means more of the cost of an EV novated lease can be paid from pre-tax income.
National Automotive Leasing and Salary Packaging Association (NALSPA) CEO Rohan Martin says the discount is central to the market:
“The Electric Car Discount is playing a huge role in driving the uptake of EVs in Australia. More than half of all new battery electric vehicles sold in Australia today are through novated leasing with the support of the EV Discount.”
It’s also helping households manage the upfront cost of an EV.
“The Electric Car Discount is a vital cost-of-living measure that everyday Australians are using to afford the upfront cost of a cheaper-to-run car, especially as fuel, housing, and other living expenses continue to rise. Survey results show that most drivers who accessed the Electric Car Discount would not have done so had the incentive not been available,” Martin adds.
NALSPA research found that 82% of people using salary packaging to buy an EV would not have done so without the Electric Car Discount.
How is the Electric Car Discount changing?
In the 2026-27 Federal Budget, the Government announced plans to wind back the Electric Car Discount.
Rather than removing it all at once, it will be phased out in stages. The full discount will continue until the end of March 2027. After that:
- From 1 April 2027, EVs valued above $75,000 but below the luxury car tax threshold (currently $91,661) will receive a 25% discount on payable FBT. EVs valued at $75,000 or less will keep the full FBT exemption until 1 April 2029.
- From 1 April 2029, all EVs below the luxury car tax threshold will receive the 25% discount on payable FBT.
Existing leases won't be affected by the changes as long as employment doesn’t change.
What happened in other countries when EV incentives ended?
How exactly the Electric Car Discount changes will affect Australia's market isn't yet known, but Savvy's research into EV adoption across 16 countries shows how quickly demand can fall when incentives are removed altogether:
- New Zealand: BEV share fell by more than 60%, from 19.0% to 7.3%, after the Clean Car Discount ended on 31 December 2023.
- Canada: BEV share fell by more than 40%, from 10.9% to 6.2%, after the iZEV program ran out of funding in January 2025.
- Germany: BEV share fell by more than a quarter, from 18.4% to 13.5%, after its subsidy ended abruptly in December 2023.
BEV share has since risen again in all three markets. While Canada and Germany both introduced new support for EVs in 2026, which likely helped their rebounds, New Zealand didn't. Its BEV share still more than doubled to 17.1% in the first half of the year, close to the 19.0% it reached under the Clean Car Discount. That puts New Zealand almost level with Australia, where BEV share reached 16.5% in the first half of 2026 after a similarly sharp rise from 8.3% in 2025.
This suggests that while incentives help move the market, they aren't the only factor in play. Things like rising fuel prices, cheaper models and a growing second-hand market can all shift buyer habits too.
Will Australia see the same drop in EV sales?
The overseas examples don't mean Australia will follow the same pattern when it rolls back its BEV incentives. The main difference is how the changes are being made. New Zealand, Germany and Canada all lost their incentives suddenly, and every buyer was affected at once. Australia's changes are staggered and hit the top end of the market first, while EVs valued at $75,000 or less keep the full exemption until 1 April 2029.
Australia does, however, have first-hand experience of what happens when an exemption ends altogether. Plug-in hybrids (PHEVs) lost their FBT exemption on 1 April 2025. According to NALSPA's September 2025 report, the share of PHEV settlements made through novated leases fell from an estimated 64% in the last quarter of 2024 to just under 10% by the second quarter of 2025, back to where it was before the policy began.
Nevertheless, Martin expects the impact of the BEV changes to be limited, because of where most EV sales sit on price:
“We believe the changes to the Electric Car Discount from April 2027 won't have a material impact on sales because most Australians are buying EVs priced below the $75,000 threshold, and a majority of EVs in Australia sit below this price point.”
This includes many of Australia's most popular models. In August, four of the ten best-selling models in Australia were EVs: the Tesla Model Y, BYD Sealion 7, Zeekr 7X and Geely EX5. All have starting prices well under $75,000 before on-road costs.
The bottom end of the market has opened up too, with the BYD Atto 1 recently cut to $19,990 driveaway, making it the cheapest new car on sale in Australia, EV or otherwise.
Savvy Benefits General Manager Adrian Taylor says the threshold mostly catches higher-spec models:
“The main difference between an EV over vs below $75,000 often comes down to the size of the battery and whether it's single or dual (AWD) motor. Single motor (front or rear wheel drive only) EVs are the pick for most people so I don't think we're going to see EV sales cool down any time soon.”
Who will be affected by the April 2027 changes?
Martin says the buyers affected will be those looking at pricier models, and he encourages them to act early:
“The changes coming into effect from April 2027 will impact a relatively small cohort of Australians who have been eyeing off EVs at higher price points. We'd encourage anyone who is thinking about making the switch to an EV that's worth more than $75,000 to start the process this side of Christmas just to be sure they have their new car and get full access to the Discount before the changes kick in.”
A Tesla Model 3 Performance, priced at $80,900, is one example of a car that would move to the 25% discount. Savvy's analysis of the FBT changes found an employee earning $100,000 a year in the 30% tax bracket would pay almost $114 more a week to lease one after 1 April 2027 than under the current rules.
The bigger unknown is what happens from 2029, when the 25% discount applies to all EVs below the luxury car tax threshold. It's too early to say whether demand will hold once nobody has the full exemption, but Martin believes the Government's staged approach gives the market the best chance:
“While EV sales have slowed down in some countries when demand-side incentives ended, we believe the Federal Government has taken a sensible approach by phasing the discount gradually to prevent demand from stalling.”
