Key facts
- China reinstated a 2% consumption tax on lithium-ion batteries from September 1, 2026.
- The tax rate will increase to 4% in September 2027.
- Sodium-ion and solid-state batteries are exempt from the tax until the end of 2028.
- Directly exported batteries remain exempt from consumption tax.
- EVE Energy and Lishen Battery have begun adjusting prices to reflect the new tax.
China has begun collecting a 2% consumption tax on lithium-ion batteries from September 1, 2026, ending an exemption that had been in place for over a decade. This move is part of a broader scaling back of electric vehicle incentives as the country's auto market undergoes a structural shift. The tax rate is scheduled to rise to 4% in September 2027.
Emerging technologies such as sodium-ion and solid-state batteries will remain temporarily exempt from the tax until the end of 2028, according to a policy issued jointly by the Ministry of Finance, General Administration of Customs, and State Taxation Administration in July. Semi-solid batteries do not qualify for the exemption.
The tax applies to battery cells, packs, and clusters, but not to complete battery energy storage systems (BESS) which are classified as complete power equipment. Taxes paid on battery inputs can be deducted when used to manufacture another taxable battery product. Research platforms like Shanghai Metals Market (SMM) and Huatai Securities have estimated the impact on battery costs, with Huatai Securities describing the overall effect on storage costs as manageable and noting that stronger suppliers are better positioned to pass costs downstream.
Battery manufacturers have begun adjusting prices. EVE Energy and Lishen Battery have circulated notices to customers regarding the additional 2% consumption tax cost for domestic deliveries from September 1. CATL also increased the listed price of its 314 Ah storage cell on its online marketplace in August, citing market supply conditions and the tax change.
Batteries exported directly from China remain exempt from consumption tax, and eligible taxes paid on purchased batteries can be refunded. China also plans to end vehicle purchase tax exemptions for new energy vehicles in 2028.