China to Phase Out EV Battery Export Tax Rebates, Spurring Industry Restructuring

Starting April 2026, China will reduce the VAT export rebate rate for power batteries from 9% to 6%, with the rebate fully phased out by 2027. This policy adjustment aims to promote high-quality industry development and discourage companies from relying on rebates to engage in low-price competition. Previously, in December 2024, the rebate rate had already been lowered from 13% to 9%. The policy’s impact is already evident in export data. In the first four months of 2026, cumulative exports of power and energy storage batteries still posted year-on-year growth; however, April alone saw a month-on-month decline of approximately 12%, ending the previous period of rapid expansion. This reflects a "front-loaded" export surge ahead of the policy deadline, which has depleted subsequent demand. Currently, exports account for nearly 20% of the industry’s total shipments, and overseas markets remain a key growth driver—though the low-price competition model is no longer sustainable. The sector is experiencing structural divergence. Small and medium-sized enterprises (SMEs) heavily reliant on rebate subsidies now face survival challenges due to razor-thin margins and mounting cost pressures. In contrast, leading firms with technological advantages and established overseas production capacities are less affected—and some may even benefit from competitors’ exits. To adapt to these changes, companies are adopting varied strategies: tightening cost controls and renegotiating pricing with customers in the short term; accelerating “capacity globalization” by building local factories overseas to circumvent export policy risks in the medium term; and focusing long-term on R&D and moving up the value chain into higher-margin segments. While the rebate phase-out will cause short-term pain, it is expected to drive China’s power battery industry toward a new growth paradigm centered on technology and global operational capabilities, rather than price competition.