A large number of charging points on the street in China. Credit: Lifeweek Understand China EV’s Market Real-time notifications when critical EV data is released All important data in one place 2,000,000+ data points Become a member China has begun phasing out the long-standing consumption-tax exemption for lithium batteries, in a move expected to increase costs across the electric-vehicle supply chain and accelerate the withdrawal of preferential tax treatment for new-energy vehicles. Under a joint announcement issued by the State Taxation Administration and other government departments, lithium primary batteries and lithium-ion rechargeable batteries will be subject to a 2% consumption tax from Sept. 1, 2026. The rate will rise to 4% from Sept. 1, 2027. The measure marks the end of an exemption that has supported China’s electric-vehicle battery industry for more than a decade. Under existing tax rules, ordinary batteries are subject to a 4% consumption tax, while lithium-ion batteries used in electric vehicles have historically received preferential treatment. By contrast, sodium-ion batteries, solid-state batteries and fuel cells will remain exempt from the tax through Dec. 31, 2028. In August 2026, the average price of domestic 314Ah lithium iron phosphate (LFP) energy storage cells was approximately 0.365 yuan/Wh (0.072 USD/Wh). Taking a new energy vehicle equipped with a 60 kWh battery as an example, the battery cost per vehicle increases by about 438 yuan (62 USD) under a 2% tax rate, this increase reaches 876 yuan (125 USD) after a 4% tax rate. Phasing out The battery-tax changes are part of a broader adjustment to China’s new-energy vehicle tax system. Since 2025, several preferential policies have been reduced or scheduled for cancellation. From Jan. 1, 2026, the purchase-tax exemption for new-energy vehicles was replaced by a 50% reduction. The applicable effective rate is 5%, while the maximum tax reduction is capped at 15,000 yuan (2,200 USD) per vehicle. On July 3, the Ministry of Finance, the State Taxation Administration and the Ministry of Industry and Information Technology announced that preferential vehicle-and-vessel tax treatment would also be withdrawn from Jan. 1, 2027. The changes will end the 50% vehicle-and-vessel tax reduction for energy-efficient vehicles, as well as exemptions for battery-electric commercial vehicles, plug-in hybrid and range-extended vehicles, and fuel-cell commercial vehicles. The relevant preferential policies have been in place for 15 years. Remaining EV subsidies Purchase tax: From 2026, the purchase tax on new energy vehicles will change from an exemption to a half-rate (5%) levy, with a cap of 15,000 (2,200 USD). This means that buying a new energy vehicle under 300,000 yuan (44,700) in China can save 5% compared to an ICE car. As the market penetration of new energy vehicles steadily increases, CarNewsChina estimates that this subsidy will be scrapped within three years, it wouldn’t be a surprise if it were abolished as early as next year. Battery tax: The lithium battery tax will remain halved until September 2027, saving buyers around 100 USD per electric vehicle depending on the battery capacity. Until at least 2028, sodium-ion or solid-state batteries will continue to benefit from a 4% battery consumption tax exemption, which is expected to save buyers around 200 USD per vehicle. Vehicle-and-vessel tax: The 50% tax reduction for energy-saving vehicles and the tax exemptions for plug-in hybrids and certain commercial vehicles will be abolished 2027. Annual costs for plug-in hybrids/range-extended vehicles will increase by approximately 300 yuan (45 USD) to 660 yuan (100 USD), while costs for pure electric passenger cars will be unaffected Editor’s comment The subsidies mentioned above are not specifically targeted at Chinese brands: all electric vehicles manufactured in China, including Tesla, Volkswagen, and Toyota, etc. are eligible. In addition to these subsidies, New Energy Vehicles (NEVs) benefit from two broader types of support: Exemption from urban road maintenance fees. Since road maintenance fees in Chinese cities are included in the price of fuel, vehicles that don’t use petrol or diesel currently do not contribute to the upkeep of urban roads. Infrastructure subsidies. China has built the most robust power grid system in the world and continues to spare no effort in promoting the construction of charging and battery-swapping infrastructure. State-owned capital is not only heavily investing in public charging piles but has now also begun to cover the costs of battery-swapping stations. Thanks to this infrastructure, even driving a Geely Xingyuan (EX2) with a CLTC range of just 310km (251 km WLTP) in China doesn’t result in range anxiety. Due to these two broader forms of subsidy, the running cost per kilometre for electric vehicles in China can be as low as 1 cent. Naturally, these benefits are not limited to Chinese-made models, electric vehicles from all over the world can enjoy them in China. Most important news in your inbox. Recaps · scheduled All you need, in one email. Instant alerts · real-time Ping me when an article goes live. 0 of 27 topics selected Bundle into one email per day — instead of one email per article No spam · Unsubscribe with one click · Change settings anytime
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