Starting 2026, Power Lithium Batteries to Be Subject to Consumption Tax, Phased Up to 4%

On July 17, the Ministry of Finance and two other government departments jointly issued the "Announcement on Adjusting Consumption Tax Policies for Certain Batteries," specifying that starting September 1, 2026, automotive power lithium-ion batteries will no longer be exempt from consumption tax and will instead be subject to a 2% consumption tax rate. The rate will further increase to 4% effective September 1, 2027. As an inclusive tax, it will be paid by battery manufacturers at the point of sale. Since power lithium-ion batteries are a core component of new energy vehicles (NEVs), this policy will impact the overall cost structure of NEVs. It remains uncertain whether the additional costs will be passed on to consumers, though market participants may accelerate purchases ahead of the policy implementation due to anticipation. Specific implementation details and market responses remain to be seen.