China will introduce a consumption tax on lithium-ion batteries starting in September 2026, ending a tax exemption that has been in place since 2015. According to China’s Ministry of Finance, lithium-ion batteries will initially be subject to a 2% consumption tax. The rate will increase to 4% in September 2027. At the same time, sodium-ion batteries, solid-state batteries, and fuel cells will remain exempt from the consumption tax through the end of 2028.
Tax Incentives Shift Toward Newer Battery Technologies
In addition to lithium-ion batteries, the new consumption tax will also apply to lithium primary batteries, mercury-free primary batteries, nickel-metal hydride batteries, and vanadium redox flow batteries. While these products will gradually become subject to the tax, sodium-ion batteries and solid-state batteries will remain exempt between September 2026 and the end of 2028.
The policy ends an 11-year exemption for lithium-ion batteries. The planned 4% tax rate matches the rate that has applied to other battery categories since 2015. According to the Chinese authorities, battery products must comply with applicable national standards. Companies will also be required to submit compliance test reports when applying for tax exemptions for the first time.
Industrial Policy Adjustment
According to the state-run news agency Xinhua, China says the policy changes are intended to support industrial upgrading and environmental protection. Reuters also noted that Chinese policymakers have been seeking to curb excess production capacity, including in the battery industry. The tax changes follow other adjustments to tax incentives for alternative-energy vehicles and indicate a gradual reduction in government tax support for parts of the battery sector.
Sources:
https://www.reuters.com/legal/transactional/china-levy-consumption-tax-on-lithium-ion-batteries-solar-cells-2026-07-17/
https://cnevpost.com/2026/07/17/china-to-impose-consumption-tax-lithium-batteries/
