From materials to cells, China’s battery industry is facing an unusual wave of price increases as new taxes and surging raw material costs squeeze margins.
By Fei Xinyi
A pricing notice from battery maker EVE Energy (300014.SZ) has been making the rounds in China’s lithium battery industry. Around the same time, leading lithium iron phosphate producer Hunan Yuneng (301358.SZ) announced price increases across its entire product line, while prices for the electrolyte additive VC have seen sharp spikes almost daily.
From materials to battery cells, China’s battery supply chain is experiencing a rare wave of across-the-board price increases. Behind the surge: a double squeeze from policy costs and raw material inflation. The ability—or inability—to pass those costs downstream is becoming a litmus test for battery makers.
A cost squeeze on two fronts
On July 16, China’s finance ministry, customs administration, and tax bureau jointly announced that consumption tax would be reinstated on lithium primary cells, lithium-ion rechargeable batteries and vanadium redox-flow batteries. The tax will be 2% from Sept. 1, rising to 4% from Sept. 1, 2027.
Sodium-ion batteries, solid-state batteries and fuel cells will remain exempt through the end of 2028, giving emerging technologies a temporary cost advantage as the policy raises costs for more mature battery technologies.
The pricing notice from EVE Energy is the first clear example of the policy being passed down the supply chain. From Sept. 1, all battery products sold domestically will incur a 2% consumption tax. Export products will be subject to tax and then refunded, leaving domestic and export prices the same. The new pricing will also apply to orders that have not yet been invoiced, orders invoiced on or after Sept. 1, and signed framework orders that have not yet been delivered.
Raw material costs are also putting upward pressure on prices.
Hunan Yuneng said its processing fees for all lithium iron phosphate products would rise by 2,000 yuan ($298) per metric ton from Aug. 1. It attributed the increase to sustained rises in the prices of key raw materials since March, amid geopolitical tensions and disruptions to supply-chain flows. The price of iron phosphate has risen from about 10,000 yuan per ton at the beginning of the year to 15,000 yuan.
SMM analyst Chen Bolin cited two main reasons for the higher processing fees: tight supplies of high-quality production capacity, which allows suppliers to prioritize higher-paying customers; and rising raw material costs. Both integrated producers and companies that source materials externally have been affected by higher sulfur prices.
Hunan Yuneng has also announced a 24 billion yuan capacity expansion plan, saying its facilities have been running at full capacity this year and new production cannot meet all of its customers’ growing orders.
The surge has been even sharper in electrolytes. On Aug. 3, the average price of VC, a key electrolyte additive, reached 229,900 yuan per ton, up more than 40% during the month and more than 400% from a low of about 45,000 yuan a year earlier. Prices have also seen repeated sharp single-day jumps in recent days.
Goldman Sachs estimates that if the 4% consumption tax is fully passed on to customers, passenger vehicle prices would rise by1% to 2%, with a slightly larger impact on economy models.
The new national standard for EV battery safety — effective July 1, 2026 — is also raising the bar. The tougher rules mean downstream auto and energy storage clients face higher procurement standards, eliminating the option to cut costs by simplifying processes. EVE Energy noted that: “In the long run, this policy may accelerate the exit of outdated capacity, benefiting industry structure optimization and market share gains for leaders.”
Downstream appetite for higher prices
Whether higher costs can be passed through ultimately depends on downstream demand. For now, strong industry conditions are providing some support.
According to SMM, China produced about 1,300GWh of lithium battery cells in the first half of 2026, up more than 60% year on year. It expects full-year output to rise by nearly 65%, with energy-storage cells increasing by nearly 90% and power cells by nearly 60%.
SMM senior analyst Wang Zihan said energy-storage demand has lifted storage cells’ share of the market from less than 30% last year to nearly 40%. In the automotive market, slower vehicle sales have been offset by a more than 30% year-on-year increase in battery capacity per vehicle, supporting demand for power cells.
Xinluo Lithium Battery senior researcher Wang Zheng said cell makers’ production schedules for the third quarter remain optimistic, supported by supply and demand. New capacity is coming online while strong energy-storage demand is being complemented by improving momentum in the automotive market.
The near-term outlook is similarly supportive. Goldman Sachs expects downstream buyers to bring forward purchases in August to lock in prices before the new tax takes effect on Sept. 1, potentially creating a short-term rush, particularly in energy storage.
But higher costs still carry consequences. While strong demand is cushioning the industry, taxes and raw material inflation are raising the threshold for profitability. The latest wave of price increases is therefore more than a simple adjustment to costs: it is another test of which battery companies have the margins, scale and pricing power to survive.
Source:
21st Century Business Herald
