From April 2027, the full tax discount will only apply to EVs costing $75,000 or less, while vehicles above $75,000 but below the luxury tax threshold will only receive a 25 per cent discount.
Also from April 2027, all EVs below the luxury tax threshold will only receive the 25 per cent discount.
The luxury tax threshold is $91,387 but rises each year with inflation.
Mr Bowen said the changes would encourage car manufacturers to focus on more affordable models of EVs.
"We certainly expected EV take-up to remain very, very strong. It's been increasing, obviously, particularly in recent months," he told ABC Radio.
"It may be that some Australians, particularly from 2027 onwards, choose to buy a slightly more affordable EV, below $75,000 instead of below $91,000 but they believe that the take-up will continue at pretty close to current rates."
Budget cost and savings
The cost of the tax break to the federal budget has increased in recent years from an initial $90 million to $1.35 billion in 2025/26 and had been expected to rise to $3 billion by 2028/29.
But a phased tightening of the incentive will save taxpayers $1.7 billion over four years from the 2026/27 budget.
EVs eligible for the discount will continue to be exempt from import tariffs.
"It is a substantial saving, but it's a better calibrated support for EV purchases, which, as I said, the country benefits when we have a higher EV take-up," Mr Bowen said.
