Three Ministries: Consumption Tax on Certain Batteries to Be Gradually Restored Starting 2026
Claire Weston
China's Ministry of Finance and two co-agencies announced that lithium and other previously exempt battery types will face a phased consumption tax of up to 4% starting September 2026, while sodium-ion, solid-state, and other frontier batteries get a roughly two-year tax-free window — the policy signal is clear: mature tech pays its way; emerging tech gets more runway.
Which batteries are losing their tax-free status?
Lithium primary cells, lithium-ion rechargeable batteries, mercury-free primary cells, nickel-metal-hydride batteries, and vanadium redox flow batteries — all five face a 2% consumption tax from September 1, 2026, rising to 4% one year later.
Photovoltaic cells (solar cells) follow a slightly later schedule: 2% from April 2027, 4% from April 2028.
This means → a decade-long tax exemption dating back to 2015 is formally ending, and producers will feel a real cost increase.
Why resume the tax now?
China has levied a 4% consumption tax on batteries since February 2015, but exempted seven categories — including lithium-ion and solar cells — because they were still emerging industries at the time.
A decade on, lithium-ion batteries are the world's largest-capacity category, and solar cells have likewise matured. The policy case for continued exemption no longer holds.
In plain terms = these batteries have "graduated" — Beijing no longer sees them as needing a tax shield.
Who still gets the exemption?
The notice carves out a "new-technology battery tax-free transition": from September 2026 through December 2028, the following are exempt —
Sodium-ion batteries, solid-state batteries, fuel cells, plus perovskite cells, tandem cells, and gallium-arsenide cells within the PV category.
This reflects a deliberate policy split: mature tech returns to normal taxation, while frontier tech gets roughly two more years of cost cushioning.
What does this mean for the industry?
Lithium-ion battery makers bear the brunt — going from zero tax to 4% squeezes already-thin margins, especially for mid- and downstream players.
This means → the sector may consolidate faster, with cost-inefficient capacity pushed out.
Sodium-ion and solid-state firms have been handed a timed exam: whether they can reach commercial-scale production before end-2028 will determine if they can stand on their own once the tax-free window closes.
Content is for reference only, not financial advice.