The Australian Automobile Association revealed the trend on Monday in its quarterly Electric Vehicle Index, which showed the market share of internal combustion engine cars dropped more than 11 percentage points in two years.
By contrast, sales of electric cars reached their peak during the September quarter and hybrid vehicles continued to accelerate.
The numbers follow the federal government announcing its 2035 environmental target requiring more low-emission vehicles on the road but also state and territory governments removing rebates for electric-car purchases.
The association's EV Index, which analyses data from the Federal Chamber of Automotive Industries and Electric Vehicle Council, found traditional, fuel-powered vehicles made up 69 per cent of cars sold between July and September.
The market share represents a drop from a more than 81 per cent market share for the same period in 2023, while 37,000 fewer of the vehicles were sold.
Electric vehicles registered their highest market share to date at 9.7 per cent of new car sales, while hybrids represented 16.5 per cent of the market and plug-in hybrids made up 4.1 per cent.
The figures prove more Australians were changing their minds about the type of cars they wanted to drive, Electric Vehicle Council policy head Aman Gaur said.
"The trend is clear: Australians are moving away from petrol cars, these expensive-to-run, environmentally dangerous cars, to cars that are better for the environment and better for the hip pocket," he told AAP.
"By the end of 2027, petrol cars could be less than 50 per cent of the market."
The high cost of petrol and rising inflation had played a role in the change, Mr Gaur said, as more motorists sought ways to reduce household costs.
Data from the EV Index showed petrol and diesel-powered cars still dominated sales in most vehicle categories despite their falling popularity, with some exceptions.
Hybrid and electric cars together made up more than 80 per cent of medium-sized vehicles sold, the figures showed, and they also outnumbered fuel-powered options among medium-sized SUVs.
But significantly greater adoption of low-emission vehicles would be needed to meet Australia's 2035 environmental target, Mr Gaur said, and state and territory governments should consider reinstating financial support for their purchase.
"The federal government's ambition is laudable and we'd really encourage the state governments who have pulled back all vehicle incentives in the last 12 months to recommit themselves," he said.
The Climate Change Authority found 50 per cent of all light vehicles purchased in the next decade would need to be electric to meet the government's emissions target of a reduction between 62 and 70 per cent.
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