China Halts New Battery Storage Plant Approvals Amid Overcapacity Concerns

China has temporarily suspended approvals for new battery storage factories, citing concerns about overcapacity in the world's largest battery manufacturing sector. The move, reported by Cailianshe, follows similar government interventions in the electric vehicle and solar panel industries, which have also grappled with excessive production capacity and ensuing price wars.

Years of generous subsidies for energy transition-linked industries like EVs, solar, and wind power have led to a surge in manufacturing capacity, impacting company bottom lines. Chinese authorities recognized last year that cutthroat competition and low-quality manufacturing were harming enterprises.

To further address the issue, China's Ministry of Finance, General Administration of Customs, and State Taxation Administration announced in July that consumption taxes would be imposed on batteries starting September 1, 2026. Mercury-free primary batteries, nickel-metal hydride batteries, lithium primary batteries, lithium-ion batteries, and all-vanadium redox flow batteries will face a 2% tax from September 2026, increasing to 4% from September 2027. Photovoltaic cells will be taxed at 2% from April 2027 and 4% from April 2028.

However, new-technology batteries, including sodium-ion, solid-state, fuel cells, and advanced photovoltaic types like perovskite, tandem, and gallium arsenide cells, are exempted from these taxes until December 2028.