Rea apologised to Lowes’ Yamaha team but after initially being confirmed in third spot, he was later penalised.
“I’m so so sorry and it wasn’t my intention to hit him,” said Rea.
The 32-year-old county Antrim man, who was on pole position in Saturday’s race, will now have to start Sunday’s morning sprint race from the back of the grid.
The shorter race also serves as qualifying for Race Two which will take place later on Sunday.
Spaniard Bautista took his 12th win in 14 races this season to extend his championship lead over Rea to 55 points after fourth-place finisher Marco Melandri was promoted to third.
Pole position man Rea was quickly overhauled by Ducati rider Bautista on the first lap, who went on to finish 7.119 seconds ahead of runner-up, Yamaha’s Michael van der Mark.
The Northern Irishman tried to edge past Lowes at the final hairpin after a race-long battle but only succeeding in clipping the Yamaha and forcing the Englishman off.
Rea looked forlorn as he cruised across the line, stopping at the Yamaha pit garage to apologise for the incident.
“I tried to stop outside the garage but it’s on deaf ears, but hopefully I can speak to him later,” Rea told Eurosport immediately after the race.
“I can’t think of anything other than what happened on the last corner. Again I’m just so sorry.”
With Melandri promoted to third spot ahead of Rea, Kawasaki’s Toprak Razgatlioglu took fifth just ahead of BMW’s English rider Tom Sykes.
Bautista’s Ducati team-mate Chaz Davies was seventh with Rea’s Kawasaki stable-mate Leon Haslam in ninth spot.
Rea’s fellow Northern Irishman Eugene Laverty missed the Jerez round of the championship due to wrist injuries sustained after crashing in practice at Imola.
His replacement Tommy Bridewell finished inside the points in 14th place.
The riders will be back in action on Sunday in Spain when the sprint race is followed by Race Two of the weekend.
|2019 WSB Riders’ Championship|
|Alvaro Bautista (Spa)||Ducati||288 pts|
|Jonathan Rea (Gbr)||Kawasaki||233|
|Michael van der Mark (Ned)||Yamaha||154|
|Alex Lowes (Ned)||Yamaha||140|
|Leon Haslam (Gbr)||Kawasaki||115|
|Marco Melandri (Ita)||Yamaha||95|