China’s EV and battery makers tussle over paying resumed lithium-ion tax: sources
China’s electric vehicle (EV) makers and battery manufacturers are in a dispute over a resumed 4 percent consumption tax on lithium-ion batteries. The tax exemption ended on September 1, returning to 2 percent, and will be fully restored in one year. Battery makers like EVE Energy planned to pass the 2 percent cost to EV manufacturers. However, EV makers are resisting due to squeezed profitability from reduced subsidies and weakening domestic demand.
The dispute over China's resumed 4 percent consumption tax on lithium-ion batteries shows the severe pressure on EV manufacturers. Battery makers intended to pass the initial 2 percent tax increase, effective September 1, directly to their clients. This move reflects a broader trend of supply chain partners pushing costs downstream in a challenging market.
For China's EV sector, this tax battle means further margin compression. Carmakers are already struggling with reduced subsidies and soft domestic demand, making it difficult to absorb new costs. This situation could force smaller EV players into consolidation or exit, as they lack the leverage of larger manufacturers to negotiate tax burdens with battery suppliers like EVE Energy.
The thing to watch is how quickly the tax is fully restored to 4 percent and who ultimately bears the cost. If EV makers are forced to absorb it, expect further price adjustments or reduced R&D spending. This could impact China's competitiveness in the global EV market.
Related reading
6 stories
China tech faces fresh scrutiny as US blacklist bill introduced, Lenovo case emerges
Alibaba unveils ‘pragmatic’ AI road map to drive monetisation, infrastructure efficiency
China’s humanoid robot IPO slowdown no threat to firms with ‘genuine strength’: Deloitte
Mind Lab builds Mint Recursive to help companies train their own AI
Investors pivot to selective China bets in technology as property growth fades: DBS Bank
