China will gradually introduce a consumption tax on lithium and lithium-ion batteries, as well as solar cells, which have been exempt from taxation since 2015, according to the Xinhua news agency.
Mercury-free, nickel-metal hydride, lithium and lithium-ion batteries, as well as vanadium flow batteries, will be subject to a 2 per cent tax from 1 September 2026. From September 2027, the rate will rise to 4 per cent.
For photovoltaic, or solar, cells, a 2 per cent tax will come into effect on 1 April 2027, and will also be increased to 4 per cent from April 2028.
The new rules were announced by the Chinese Ministry of Finance, the General Administration of Customs and the State Taxation Administration.
The introduction of the tax may increase the production costs of batteries and solar cells in China. If manufacturers pass on the additional costs in full to buyers, selling prices could rise by approximately 2 per cent in the initial phase and up to 4 per cent once the rate is fully implemented.
However, the actual price increase will depend on competition, companies’ profitability and contracts with customers. Chinese manufacturers may absorb some of the costs themselves to avoid losing market share in both domestic and international markets.
The changes could potentially affect the cost of electric vehicles, energy storage systems and solar power stations, as batteries and photovoltaic modules are among the key components of such projects. At the same time, due to the high proportion of other costs, the price of a finished electric vehicle or solar power station will not necessarily rise by the full 4 per cent.
Certain promising technologies will remain temporarily exempt from tax until December 2028. These include sodium-ion and solid-state batteries, fuel cells, as well as perovskite, tandem and gallium arsenide solar cells.
China currently levies a 4 per cent consumption tax on most battery products. At the same time, lithium and lithium-ion batteries, solar cells and fuel cells have enjoyed an exemption since 2015.
This policy has contributed to a rapid expansion of production capacity and helped Chinese companies become global leaders. However, the oversupply has simultaneously intensified price competition and eroded the profitability of some manufacturers.
Analysts at Citic Securities estimate that the tax changes could generate an additional 45 billion yuan, or around $6.6 billion, for the Chinese budget.
Following the announcement of the new rules, shares in solar cell manufacturer Longi Green Energy Technology rose by 2.1 per cent, JinkoSolar by 4 per cent, and CATL, the world’s largest battery manufacturer, by 4.6 per cent.