The Federal Government’s decision to launch a statutory review of the Electric Car Discount in December 2025 reflects just how quickly Australia’s electric vehicle market has changed since the policy was introduced.
Designed to accelerate early adoption, the Electric Car Discount removed fringe benefits tax (FBT) and import tariffs for eligible electric vehicles from July 2022. At the time, electric vehicles accounted for less than two per cent of new vehicle sales and consumer choice was limited.
Three years on, the Government argues the policy has delivered on its original intent.
Minister for Climate Change and Energy Chris Bowen said the combination of incentives and broader reforms had helped reshape the market.
“We want more Australians to have more choice of cheaper to run cars that save them money at the bowser – and our policy settings are encouraging this,” Bowen said.
“Since coming to Government our suite of policies, including the electric car discount, investing in more charging and the delivery of our long overdue New Vehicle Efficiency Standard, have seen more brands enter the market and demand for lower emitting vehicles increase, especially in the outer suburbs.”
Treasury estimates almost 100,000 vehicles have benefited from the FBT exemption, with electric vehicles now making up around 10 per cent of new vehicle sales. The number of EV models available has increased from 56 to more than 160, with a growing range of lower-priced options now available.
Where the discount has worked best
From an industry perspective, the Electric Car Discount has been most effective in the consumer and novated leasing market, rather than in company-owned fleets.
Employees using salary packaging arrangements have been the primary beneficiaries, with novated leasing emerging as the fastest and simplest pathway into electric vehicles. The removal of FBT has significantly reduced repayments, making EVs financially attractive even where purchase prices remain higher than internal combustion alternatives.
Industry suppliers have also benefited. Salary packaging and novated lease providers have experienced strong growth in enquiries and transaction volumes, while higher average vehicle values have lifted finance margins and profitability. Vehicle manufacturers, in turn, have seen increased sales and greater confidence to bring additional electric models to Australia.
Treasurer Jim Chalmers acknowledged that uptake had exceeded early expectations.
“The take up of electric vehicles over the past few years has exceeded expectations and that’s been good for drivers, good for business and good for the climate,” Chalmers said.
“The electric car discount has made EVs cheaper to support early adoption and the next step is to review the policy as we committed to do when we legislated it.”
Why corporate fleets have been slower to respond
Despite strong headline growth, the impact of the Electric Car Discount on corporate and government-owned fleets has been more limited.
Many organisations have not used the incentive to materially accelerate EV adoption across their fleets. Instead, activity has tended to focus on pilot programs, executive vehicles or employee salary packaging rather than wholesale fleet transition.
The reasons are largely structural. Operating electric vehicles introduces new layers of complexity that many fleets are not yet equipped to manage – including charging infrastructure, energy costs, data integration, driver education and internal governance across multiple departments.
At the same time, many organisations are still operating with low levels of fleet management maturity, making it difficult to plan and execute large, multi-stakeholder transformation projects such as fleet electrification.
As a result, the existence of a tax incentive alone has not been sufficient to drive widespread change.
Will the FBT exemption end?
The answer is almost certainly yes.
The Electric Car Discount was always intended as a transitional policy. With the market now established and supply improving, it is widely expected that the FBT exemption will conclude around 2027, consistent with earlier signals.
The Government has made it clear that future progress will be supported by longer-term structural measures, particularly the New Vehicle Efficiency Standard, rather than ongoing demand-side incentives.
Should fleets rush to buy EVs before it ends?
Fleet News Group does not believe fleets should rush to procure electric vehicles simply to capture the remaining benefits of the FBT exemption.
Doing so risks higher costs, poor utilisation outcomes and operational issues that can undermine confidence in electric vehicle programs. Instead, fleets should focus on a measured, structured transition, grounded in fleet management fundamentals.
That includes:
- Utilisation analysis to confirm vehicles are genuinely required
- Fit for purpose selection based on task, not default categories
- Whole of Life Cost and Best Value analysis to assess financial and operational impacts
- Capability planning to ensure charging, policy and governance frameworks are in place before scaling
The review of the Electric Car Discount marks the end of the market-creation phase. For fleets, the next phase will be defined less by tax settings and more by planning discipline, organisational capability and sound fleet management practice.
For many organisations, the real work of transitioning to zero-emissions motoring is still ahead.
