Key facts
- China will impose a consumption tax on lithium-ion batteries starting September 1, 2026.
- The tax rate for lithium-ion batteries will be 2% initially, increasing to 4% in September 2027.
- Sodium-ion, solid-state batteries, and fuel cells will be exempt from consumption tax until the end of 2028.
- This policy change signifies a strategic shift away from supporting mature battery technologies towards next-generation alternatives.
China is set to reinstate a consumption tax on mature battery technologies, including lithium-ion batteries, beginning September 1, 2026. This move marks a strategic pivot by Beijing to withdraw policy support from the increasingly competitive and oversupplied lithium battery sector. Concurrently, emerging alternatives such as solid-state and sodium-ion batteries, along with fuel cells, will remain exempt from this tax until the end of 2028.
The consumption tax on lithium-ion batteries will start at 2% and is scheduled to rise to 4% from September 1, 2027. This policy change effectively ends an 11-year tax exemption for lithium-based batteries, which was initially implemented in 2015 to foster the growth of electromobility and other low-emission technologies.
The exemption for next-generation battery technologies highlights China's focus on accelerating their development and adoption. Companies like CATL and BYD are already progressing with the industrialization of solid-state batteries, with plans to integrate them into vehicles from 2027. The tax exemption is expected to further stimulate the market ramp-up of these advanced battery solutions.
This decision is part of a broader recalibration of China's support policies for electromobility, following earlier announcements to phase out tax incentives for certain electric and plug-in hybrid vehicles from 2027. The evolving market landscape and technological advancements are driving these policy adjustments.