Quick Take: Global Energy Storage: China announces consumption tax on batteries - Implications

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Quick Take: Global Energy Storage: China announces consumption tax on batteries - Implications

20 July 2026

Global Energy Storage

Quick Take: Global Energy Storage: China announces

consumption tax on batteries - Implications

China has announced the introduction of a consumption tax on the lithium-ion Neil Beveridge, Ph.D.

+852 2123 2648 battery industry after an 11-year exemption. Starting from September 1, 2026, a 2%

neil.beveridge@bernsteinsg.com consumption tax will be levied on lithium-ion batteries at the cell level. The tax rate will

subsequently double to 4% beginning September 1, 2027. To prevent double taxation

Brian Ho, CFA within the supply chain, batteries produced for internal use in the continuous production

+852 2123 2615

brian.ho@bernsteinsg.com of other taxable battery products will be exempt, and taxes paid on externally purchased

batteries used in continuous production can be deducted.

Kelvin Yuan, Ph.D., CFA

+852 2123 2612 The impact on battery pack price will be relatively small but nevertheless will raise

kelvin.yuan@bernsteinsg.com costs. Current battery prices for LFP and NMC are US$54.8/kWh and US$66.2/kWh

respectively. While the increase in tax will raise the cost of battery cells by 2% (2026) and

4% by 2027, at the pack level the increase in costs will be 1% (2026) and 3% (2027) by

2027. For ESS systems the new tax will increase the cost by 1-2% by 2027 which should

limit the demand impact.

Sodium ion and solid-state batteries will be exempt from the new consumption

tax. The new tax covers all conventional lithium-based battery technology including LFP

batteries, nickel-based batteries, and vanadium redox flow batteries. Emerging battery

technologies such as sodium-ion batteries, solid-state batteries, and fuel cells will remain