China Imposes 2% Tax on Lithium Batteries and Solar Cells Starting September

China's Ministry of Finance, together with the General Administration of Customs, announced on July 17 a 2% consumption tax on lithium-ion batteries and solar cells. The levy will take effect in stages beginning September 1, 2026, according to Reuters and Xinhua.

The tax ends a fiscal exemption in place since 2015 that had shielded lithium-ion batteries and solar cells from the general 4% tax China applies to batteries. The adjustment aims to curb industrial overcapacity in the photovoltaic and battery sectors, whose margins have collapsed following years of aggressive capacity expansion. For Mexico and Latin America, whose solar and battery storage projects (BESS) depend on Chinese manufacturing, the tax represents a staged increase in the cost of imported inputs, at a moment of record renewable capacity expansion across the region.

The tax schedule establishes two phases. Lithium-ion batteries, primary lithium batteries, and other rechargeable batteries such as nickel-metal hydride will be taxed at 2% from September 1, 2026, with the rate rising to 4% on September 1, 2027. Photovoltaic cells begin paying 2% on April 1, 2027 and move to 4% on April 1, 2028. By contrast, next-generation technologies (sodium-ion batteries, solid-state batteries, fuel cells, and perovskite, tandem, and gallium arsenide solar cells) remain exempt until December 31, 2028. Xinhua cited analysts who described the measure as a shift toward precision incentives focused on technological innovation.

The staggered tax gives project developers in Latin America a 12- to 24-month window to adjust their supply chains before the rate rises to 4%. The IEA's upcoming clean technology cost report, expected in October, will measure the impact on international prices.

This article was produced with artificial intelligence assistance from verified sources and reviewed by a human editor before publication.