EV and hybrid vehicle finance hits A$7.37bn as policy uncertainty risks slowdown

Finance for electric and hybrid vehicles in Australia surged to A$7.37 billion in 2025, marking a 20 per cent year-on-year increase, according to new data from the Australian Finance Industry Association (AFIA).

The sharp rise comes as nearly 130,000 Australians switched to lower-emission vehicles, highlighting growing momentum in the transition to cleaner transport. However, industry leaders have warned that recent and proposed policy changes could threaten to stall progress.

AFIA’s latest Electric Vehicle (EV) & Hybrid Finance Report shows that EVs and hybrids are capturing an increasing share of the financed vehicle market. Despite this growth, the transport sector still accounts for around 22 per cent of Australia’s emissions, underlining the scale of the challenge in reaching net zero targets.

Concerns are mounting over the potential rollback of government incentives, particularly the Fringe Benefits Tax (FBT) exemption – known as the Electric Car Discount. New polling indicates that more than one in three Australians (37 per cent) would be less likely to purchase an EV if the exemption were removed, while nearly half (47 per cent) still expect their next vehicle to be a traditional internal combustion engine (ICE) model.

“The data tells a clear story: government incentives are working,” she said. “Nearly 130,000 vehicles and A$7.37 billion in finance in a single year shows this has been an incredibly effective policy in helping Australians make the switch to vehicles that are cleaner and cheaper to run.”

She added that inconsistent policy signals risk undermining confidence. “When policy is uncertain and there are mixed signals from Government, Australians take that signal and take their foot off the pedal, and not just in their views about vehicles, but in their views about clean and renewable energy all round.”

The report also points to the sensitivity of the market to policy shifts. The removal of the FBT exemption for hybrid vehicles in March 2025 triggered an immediate downturn, with hybrid financing in the novated leasing channel dropping by around 70 per cent in April and failing to recover throughout the year.

Tate described the episode as a cautionary lesson for policymakers. “The market responded immediately and negatively, showing how sensitive consumers and businesses are to policy change. Policymakers should take that as a warning, not a template,” she said.

Further research commissioned by AFIA reveals a divided market, with 39 per cent of Australians likely to choose an electric or hybrid vehicle next, compared to 46 per cent favouring petrol or diesel models. The findings reinforce the importance of incentives in tipping the balance toward cleaner alternatives.

The finance industry, Tate said, is already playing a major role in supporting the transition, deploying billions of dollars annually into EV and hybrid lending. However, she stressed that sustained progress will depend on long-term policy certainty, expanded charging infrastructure, and continued collaboration between the public and private sectors.

“At a time when global conflict is highlighting potential fragilities in our supply chains, and Australians are looking at ways to manage their household energy needs and costs, EVs and hybrid vehicles are a critical ingredient of our economic resilience, financial security, and future wellbeing,” she said.

The report calls on the government to maintain key incentives, including the FBT exemption for EVs, and to consider reintroducing support for plug-in hybrids to ensure momentum in the transition is not lost.