China is scaling back support for new-energy vehicles as domestic demand shows signs of slowing. From September 1, lithium-ion batteries used in electric and plug-in hybrid vehicles are subject to a 2% consumption tax. The rate is scheduled to rise to 4% in September 2027. China had exempted these batteries from the tax since 2015; the previous rate was 4%, making this the first adjustment in 11 years.
The added cost could flow through the supply chain to battery and vehicle buyers. Chinese media report that battery maker EVE Energy plans to add the 2% tax to its product prices. Beijing is continuing incentives for some newer battery technologies, including sodium-ion and solid-state batteries, which are not yet widely used. Export support is also being reduced: the rebate for exporters of EV batteries fell from 9% to 6% in April and is due to end in January, though the report does not specify the year.
Vehicle buyers are also facing a phased return of purchase tax. New-energy vehicles were fully exempt from 2014 through 2025; the tax became 5% in January 2026 and is set to reach the standard 10% rate in January 2028. The article says NEV sales fell 10% in the first half of 2026 year on year, while such vehicles accounted for 48% of new-car sales in 2025, up from 5% in 2020. A CATL executive said the policy changes may favor leading companies. The shift comes as weaker consumer spending and property-market difficulties weigh on demand.