China reinstates 2% tax on lithium-ion batteries after 11-year exemption

On September 1, China began levying a consumption tax on lithium-ion batteries, ending an exemption that had lasted for more than a decade. The new charge adds costs for domestic energy storage and battery manufacturers.

Return of an old tax

This marks the return of a provision that had formally existed for years. China brought batteries into its consumption tax system in February 2015, setting the statutory rate at 4%.

At the same time, lithium-ion batteries, primary lithium batteries, nickel-metal hydride batteries, fuel cells, solar cells and vanadium flow batteries were exempted as part of a policy supporting emerging clean energy industries.

New rates from September

Under regulations jointly issued in July by the Ministry of Finance, the General Administration of Customs and the State Taxation Administration, the following products have been subject to a 2% tax since September 1, 2026:

• lithium-ion batteries,
• primary lithium batteries,
• nickel-metal hydride batteries,
• mercury-free primary batteries,
• vanadium flow batteries.

The rate will increase to the statutory level of 4% on September 1, 2027.

The regulations maintain temporary tax exemptions until the end of 2028 for sodium-ion batteries, solid-state batteries and fuel cells.

On August 27, the State Taxation Administration clarified that semi-solid-state batteries do not qualify as solid-state batteries and are therefore not covered by the exemption. Tax-exempt products must also comply with applicable national standards and be supported by the relevant test reports.

An important distinction for energy storage systems

For the stationary energy storage industry, the tax authority has clarified an important boundary of taxation. Lithium-ion cells and battery packs are taxable, as are battery clusters made up of individual cells, which are also treated as battery products.

However, a complete energy storage system that includes electrical equipment, thermal management, fire protection and control systems is classified as complete energy equipment and is not subject to the additional consumption tax.

Consumption tax previously paid on battery components may also be deducted when those components are used to manufacture another taxable battery product. As a result, the new tax does not translate into a straightforward 2% increase in the price of an entire BESS.

Estimated impact on prices

Before the regulations were fully clarified, research platform Shanghai Metals Market estimated that the 2% rate would increase cell-level prices by approximately CNY 0.00648 per Wh (around USD 0.96 per kWh), based on a lithium-ion cell price of CNY 0.324 per Wh (around USD 48.21 per kWh).

SMM noted that the ultimate impact would depend on exactly where the tax boundary was drawn along the supply chain—from the individual cell to the complete system.

Brokerage firm Huatai Securities estimated that, with energy storage cell prices at around CNY 0.40 per Wh and assuming the entire cost is passed on to customers, the tax could add approximately CNY 0.008 per Wh at the 2% rate and CNY 0.016 per Wh at the 4% rate.

Huatai analysts assessed the overall impact on energy storage costs as manageable, while noting that stronger suppliers would be better positioned to pass the cost further down the supply chain.

Manufacturers are already raising prices

Battery manufacturers have already begun adjusting their price lists. EVE Energy sent customers a notice stating that lithium battery products supplied domestically from September 1 would incur an additional 2% consumption tax charge. Lishen Battery issued a similar notice in August.

Meanwhile, on August 1, CATL raised the listed price of its 314 Ah energy storage cell on its online platform from CNY 0.414 per Wh to CNY 0.423 per Wh. However, recent increases in cell prices have been driven by both the tax changes and supply conditions in the market.

Exports remain exempt from the additional tax

Exports are treated differently. Batteries exported directly remain exempt from consumption tax, while eligible tax previously paid on purchased batteries may be refunded.

This should not be confused with China’s separate export VAT rebate policy. The VAT rebate rate for battery products was reduced from 9% to 6% in April and will be abolished entirely from January 1, 2027.