China’s Ministry of Finance, the General Administration of Customs and the State Taxation Administration announced that lithium-ion batteries and several other battery types will be subject to a new consumption tax beginning September 1, 2026. Under the policy, lithium-ion batteries, lithium primary cells, mercury-free primary batteries, nickel-metal hydride batteries and vanadium redox flow batteries will incur a 2 percent levy from September 2026, rising to 4 percent on September 1, 2027. This change ends an 11-year exemption designed to promote energy conservation and environmental protection.
In contrast, sodium-ion batteries, solid-state batteries, fuel cells and emerging photovoltaic cell technologies—including perovskite, tandem and gallium arsenide cells—will remain exempt from the consumption tax through December 31, 2028. Photovoltaic cells generally will face a 2 percent levy from April 1, 2027, increasing to 4 percent from April 1, 2028, with next-generation PV cells retaining the exemption until the end of 2028.
The adjustment represents a systematic removal of most items on China’s 2015 battery tax-exemption list, aligning the target rate with the standard 4 percent that previously applied to lead-acid batteries and other products. Companies seeking the reduced or zero-rate treatment must meet national standards and submit compliance test reports when applying for the incentive.
Lithium-ion remains the dominant technology for electric vehicle powertrains in China. According to the China Automotive Battery Innovation Alliance, installed power battery volumes in the first half of 2026 reached 335.6 GWh—up 12 percent year-on-year. At the same time, China’s new energy vehicle penetration rate has continued to rise, accounting for 54 percent of passenger car retail sales in the first half of 2026, following 16.49 million NEV units sold in 2025.
This battery tax adjustment follows earlier announcements that certain vehicle and vessel tax exemptions for plug-in hybrid and battery-electric commercial vehicles will end in 2027. The series of policy shifts supports China’s goal of having new energy vehicles represent 30 percent of its passenger car fleet by 2030.
Source: CNEV Post
