Electric vehicles will become cheaper in Australia this year as part of a deal cut with the government by the Greens and Senate independent David Pocock.
The agreement, made just one day before the Electric Car Discount Bill was due in the Senate, will cut taxes on eco-friendly cars, give battery electric vehicles priority in commonwealth fleets, and limit subsidies applied to controversial plug-in hybrid electric cars.
Electric vehicle advocates called the policy a "landmark moment" for transport in Australia, though some environmental groups said there was more to do to stop Australia falling behind the rest of the world.
Labor had pledged to cut fringe benefits tax on low-emission vehicles to encourage fleet owners and employers to replace petrol vehicles with greener alternatives.
But the laws looked set to be blocked by the Senate crossbench because they would cut the price of plug-in hybrid vehicles that feature petrol engines.
The new deal will see the price of battery electric, hydrogen fuel cell and plug-in hybrid vehicles slashed by $4700 for individuals or up to $9000 for businesses, with savings backdated to July.
But tax cuts for hybrid vehicles will be short-lived, with Greens party leader Adam Bandt revealing their support will be phased out on April 1, 2025.
Priority will also be given to battery electric vehicles in government fleet procurement by removing hybrids in all but exceptional circumstances.
"The Greens have fast-tracked electric vehicles," Mr Bandt said.
"The government fleet will go electric and when these cars are sold second-hand, it will help bring the cost down of EVs for everyday people."
He said it showed the government could be pushed into going "further and faster on climate".
Greens Senator Sarah Hanson-Young said the government should use the two-year window for phasing out plug-in hybrid support to build more charging stations and speed up Australia's transport transition.
"The government needs to come to the party with the other policy measures needed to ensure people have the opportunity to charge, to recharge and to afford that infrastructure," she said.
Senator Pocock, who proposed the "sunset clause" on discounts for plug-in hybrids, said it was important to lower the price of electric cars but he did not want to see the second-hand market flooded with hybrid vehicles still using petrol engines.
"My position is that plug-in-hybrids are a fossil fuel technology that should not be subsidised by taxpayers in this bill," he said.
"This bill provides tax incentives to mostly wealthier Australians through fleet vehicles, which will create a much-needed second-hand EV market in a few years' time."
Senator Pocock said he hoped more Australians would be able to afford electric vehicles as a result of the deal and access "much lower fuel costs, lower maintenance costs and a better driving experience".
Electric Vehicle Council chief executive Behyad Jafari called the deal a "landmark moment" for transport, saying it would also help lower Australia's carbon emissions and "reduce our precarious dependence on foreign oil".
"This is a powerful demonstration of how far we've come in just a few short years," he said.
Greenpeace Australia Pacific senior campaigner Lindsay Soutar said the agreement was "a step in the right direction" but said the government could do more to increase competition and lower prices, as tipped in a national consultation paper in October.
"While the world is racing ahead in the adoption of electric vehicles, in Australia this year only 3.39 per cent of new vehicle sales were electric," she said.