Since 1 September, lithium-ion batteries have been subject to a consumption tax of two per cent. This will rise to four per cent in September 2027. The change was already announced in July and ends a tax exemption that has been in place since 2015.
In contrast, sodium-ion and solid-state batteries, as well as fuel cells, will remain exempt from consumption tax until the end of 2028. China is thus partially shifting tax incentives away from the now-established lithium-ion technology towards alternative technologies.
The immediate additional costs due to the new battery tax are likely to remain limited for the time being. CarNewsChina calculates that for an electric car with a 60-kWh battery, the two per cent tax would result in additional battery costs of around 438 yuan, or $62 USD. With the increase to four per cent, this would rise to around 876 yuan, or $125. However, the calculation is based on prices for Chinese LFP storage cells and is therefore merely an illustrative example.
The battery tax is just part of a broader realignment of China’s incentive policy: since the beginning of 2026, electric vehicles and plug-in hybrids (grouped under the NEV designation in China) have been subject to a purchase tax reduction of 50 per cent instead of a full exemption. The effective tax rate is thus five per cent, with the relief capped at 15,000 yuan per vehicle.
