China will begin imposing a consumption tax on lithium-ion batteries from Sept. 1, 2026, ending an 11-year tax exemption for the country’s dominant battery technology while introducing temporary tax exemptions for several next-generation battery technologies.
The policy was jointly announced by the Ministry of Finance, the General Administration of Customs and the State Taxation Administration.
Under the new rules, lithium-ion batteries, lithium primary batteries, mercury-free primary batteries, nickel-metal hydride batteries and vanadium redox flow batteries will be subject to a 2% consumption tax beginning Sept. 1, 2026. The rate will increase to 4% from Sept. 1, 2027.
Next-Generation Batteries Receive Tax Exemptions
The new policy grants temporary consumption tax exemptions to sodium-ion batteries, solid-state batteries and fuel cells from Sept. 1, 2026 through Dec. 31, 2028.
The exemption also applies to several emerging photovoltaic technologies, including perovskite cells, tandem cells and gallium arsenide solar cells.
The announcement states that eligible battery and photovoltaic products must comply with applicable national standards. Manufacturers seeking tax exemptions will be required to obtain compliance testing reports before applying for the preferential treatment.
End of Long-Running Tax Incentive
China introduced a 4% consumption tax on batteries in February 2015 but exempted lithium-ion batteries, nickel-metal hydride batteries, solar cells and fuel cells to encourage the development of energy-saving and environmentally friendly technologies.
The latest policy largely removes those exemptions. Under the revised framework, all battery categories that previously benefited from the 2015 exemption—except fuel cells—will become subject to the consumption tax. The target tax rate of 4% also aligns with the standard rate historically applied to other battery products.
The changes mark the end of more than a decade of tax incentives for lithium-ion batteries, which currently dominate China’s electric vehicle battery market.
According to data from the China Automotive Battery Innovation Alliance (CABIA), vehicle power battery installations reached 335.6 gigawatt-hours during the first six months of the year, an increase of 12% compared with the same period last year.
Policy Shifts Toward Emerging Technologies
While lithium-ion batteries will become taxable, the temporary exemptions for sodium-ion and solid-state batteries provide preferential treatment for technologies that remain in the early stages of commercialization.
Several battery manufacturers, including CATL and BYD, have indicated plans to begin limited commercial deployment of solid-state batteries in vehicles around 2027.
The announcement also introduces a consumption tax on photovoltaic cells. Conventional solar cells will become subject to a 2% tax beginning April 1, 2027, with the rate rising to 4% from April 1, 2028. Emerging photovoltaic technologies covered by the exemption will remain tax-free through the end of 2028.
Broader Policy Adjustment
The battery tax changes follow other adjustments to China’s incentives for the new energy vehicle sector.
Earlier this month, authorities announced that vehicle and vessel tax exemptions for plug-in hybrid vehicles, battery-electric commercial vehicles and several other vehicle categories will be phased out beginning in 2027.
The policy changes come as new energy vehicle adoption continues to expand in China. According to the China Passenger Car Association (CPCA), domestic NEV sales reached 16.49 million units in 2025, accounting for more than half of new vehicle sales in the country.
Source: CnEVPost
