China will end its 11-year exemption of lithium-ion batteries and most photovoltaic (PV) cells from consumption tax, the government has announced.
China’s consumption tax applies only to certain luxury, high-end or environmentally unfriendly goods like cigarettes, alcohol, jewellery and cars.
Lithium-ion batteries will be charged a 2% rate from September, rising to 4% from next September. Regular PV cells will be given a buffer period, with 2% starting next April moving to 4% from April 2028.
From this September to the end of 2028, the tax will not apply to sodium-ion batteries, solid-state batteries, fuel cells or certain advanced PV cells.
The new policy comes at a time of rapid growth in the battery industry. Reports show that many companies have recently turned their losses into profits. The policy is a bid to contain the unchecked expansion and ensure a “healthy development” for the sector, Li Xuhong, vice president of the Beijing National Accounting Institute, told Xinhua.
Meanwhile, the slight delay for taxation on regular PV cells is likely due to the relatively tough situation in the solar cell industry, especially given the recent cancelling of the export tax rebates from this April, industry expert Lv Jinbiao told Shanghai Securities Journal.
Industry insiders say the continued exemption for sodium-ion and solid-state batteries, plus advanced PV cells, is designed to support these emerging technologies, according to Beijing News.
Some predict that the returning taxation will mean a potential price increase for an electric vehicle (EV) of between USD 38 and USD 355. However, Li Yanwei, an automobile expert, suggests to Chengdu Business Paper that it will be EV and battery companies, not consumers, who will bear the additional cost.
Cui Dongshu, secretary-general of the China Passenger Car Association, told the outlet that the policy update will encourage carmakers to produce batteries by themselves instead of buying in batteries.
China’s EV exports grew 75.1% year on year in the first half of 2026, reports Caixin. Overall exports of the “new three” products – EVs, solar cells, and lithium-ion batteries – rose 51.6% year on year, according to customs statistics.
Read Dialogue Earth’s previous report on China’s solar villages.