The lithium carbonate futures price plunged yesterday following the introduction of consumption tax on lithium-ion batteries. That is, from September 1, 2026, a 2% consumption tax will apply to lithium primary and lithium-ion batteries, rising to 4% from September 1, 2027. Sodium-ion and solid-state batteries will be exempt through end-2028; batteries for continuous production or export are also exempt.
The market has largely priced this in via earlier speculation, so short-term impact is limited. Over time, the tax will raise lithium-ion battery costs, equivalent to a RMB 10,000-12,000/tonne rise in lithium carbonate costs at 2%, and RMB 20,000-24,000/tonne at 4%. This will accelerate capacity consolidation among smaller players and shift demand toward tax-exempt sodium-ion and solid-state batteries, potentially capping long-term lithium demand.
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