China to impose consumption tax on lithium batteries, exempting sodium-ion and solid-state cells
Lithium-ion batteries will be subject to a 2% consumption tax from September 1, 2026, with the rate rising to 4% from September 2027.
Sodium-ion batteries, solid-state batteries and fuel cells will be exempt through the end of 2028, highlighting a policy tilt toward next-generation technologies.
China will levy a consumption tax on lithium-ion batteries starting September 1, 2026, ending an 11-year tax exemption for the product category.
Meanwhile, next-generation battery technologies such as sodium-ion and solid-state batteries will be exempted, showing that the policy balance is tilting toward newer technologies.
An statement released on Friday by China’s Ministry of Finance, the General Administration of Customs and the State Taxation Administration announced the policy change.
Lithium-ion batteries, lithium primary batteries, mercury-free primary batteries, nickel-metal hydride batteries and vanadium redox flow batteries will be subject to a consumption tax at a rate of 2% from September 1, 2026.
From September 1, 2027, the consumption tax rate on these battery products will rise to 4%.
By contrast, from September 1, 2026 through December 31, 2028, sodium-ion batteries, solid-state batteries and fuel cells, as well as perovskite cells, tandem cells and gallium arsenide cells among photovoltaic (PV) cells, will be exempt from the consumption tax.
Lithium-ion batteries are by far the dominant technology for electric vehicle (EV) power batteries at present.
In the first six months of this year, the cumulative volume of power batteries installed in vehicles in China reached 335.6 GWh, a 12.0% increase from the same period last year, according to data from the China Automotive Battery Innovation Alliance (CABIA).
China began levying a 4% consumption tax on batteries in February 2015, but exempted lithium-ion batteries, nickel-metal hydride batteries, solar cells, and fuel cells at the time to promote energy conservation and environmental protection.
The latest adjustment systematically ends that exemption arrangement: all categories on the 2015 exemption list, except fuel cells, will now be taxed, and the target rate of 4% matches the standard rate that applied to lead-acid batteries and other products back then.
This means the 11-year tax break for lithium-ion batteries is coming to an end, which could push up costs for Chinese EV makers.
The targeted exemptions for sodium-ion and solid-state batteries, meanwhile, give these two closely watched technology routes a clear cost advantage.
These two product categories were not included on the 2015 tax-exemption list and have therefore been subject to a 4% consumption tax ever since. The latest adjustments have expanded their tax-exempt status.
China’s major battery makers are racing to commercialize solid-state batteries, with several manufacturers, including CATL (HKEX: 3750) and BYD (HKEX: 1211), planning small-batch vehicle installation around 2027.
The latest announcement also stipulates that PV cells, also known as solar cells, will be subject to a 2% consumption tax from April 1, 2027, with the rate rising to 4% from April 1, 2028.
Emerging PV technologies such as perovskite cells will likewise be exempt through the end of 2028.
According to the announcement, battery products eligible for the tax reduction or exemption must comply with the corresponding national standards, and taxpayers must obtain compliance test reports before filing for the tax break for the first time.
The battery tax adjustment is China’s latest move to scale back tax support for the new energy vehicle (NEV) industry.
