China Plans New Taxes on Lithium-Ion Batteries and Solar Cells Impacting Global Markets Including Israel
For the first time in a decade, China will impose new taxes on lithium-ion batteries and solar cells, key components in electric vehicles and solar panels. According to Bloomberg, starting September 2026, China will levy a 2% purchase tax on lithium-ion batteries, increasing to 4% after one year. Solar cells will face a similar tax beginning April 1, 2027. Concurrently, China will completely eliminate VAT rebates for battery exporters by January 1, 2027, following a phased reduction from 9% to 6% earlier this year. These measures target manufacturers, potentially raising costs that could ripple into global markets, including Israel.
This policy shift marks a change in Beijing's industrial strategy after fostering the battery and solar sectors for over a decade, during which China became the dominant global producer, responsible for over 80% of lithium-ion battery production worldwide, according to the International Energy Agency. The new taxes aim to curb aggressive price competition within China, known as "involution," which has eroded profitability, and to encourage investment in advanced energy technologies.
Major Chinese battery producers like CATL and BYD, which dominate the global market, will be directly affected. The policy is expected to force smaller manufacturers to exit or merge, consolidating the industry around a few profitable players. Notably, advanced technologies such as sodium-ion batteries, solid-state batteries, and hydrogen fuel cells are exempt from these taxes until the end of 2028, signaling a push toward next-generation energy solutions. Similarly, advanced solar technologies like perovskite and tandem cells are also excluded.
The impact is significant for energy storage sectors, where system costs can reach hundreds of millions of dollars. Zvi Ben-David, Vice President of Chinese energy company HyperStrong, which operates in Israel since early 2025, explained that buyers face a dilemma: purchase batteries before the tax increase and bear storage and performance degradation costs, or proceed as usual. He emphasized that since China controls most solar cell and energy storage production, Israeli buyers have limited alternatives and must choose reliable partners who guarantee long-term system performance.
These developments highlight China's intent to regulate its clean energy industries more tightly while steering the market toward innovative technologies, with global repercussions for electric vehicles, energy storage, and solar power sectors.
