Gf Securities has released a research report stating that on July 19th, three government departments, including the Ministry of Finance, announced a phased restoration of consumption tax on certain battery categories. The firm believes that lithium battery and energy storage system exports are expected to enjoy consumption tax benefits. The report suggests the policy's overall impact on the battery industry is limited, with its effect on downstream demand ranked as overseas energy storage < new energy vehicles < domestic energy storage. This policy adjustment is also seen as favorable for the penetration of new battery technologies such as sodium-ion and solid-state batteries. With the peak season of the second half of 2026 approaching, leading battery manufacturers are seen as having valuation safety margins and leading technological innovation in the industry chain. The firm is optimistic about the continued profit recovery trend for midstream materials and the demand for HVLP copper foil driven by AI.
Gf Securities Co.,Ltd.'s main views are as follows:
Policy Details: Phased Restoration of Consumption Tax on Certain Batteries
According to the Ministry of Finance's official website, an announcement jointly issued by the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration on July 19th states that starting September 1, 2026, a consumption tax of 2% will be levied on mercury-free primary batteries, nickel-metal hydride batteries, lithium primary batteries, lithium-ion batteries, and all-vanadium redox flow batteries. This rate will increase to 4% starting September 1, 2027. From September 1, 2026, to December 31, 2028, sodium-ion batteries, solid-state batteries, fuel cells, and perovskite, tandem, and gallium arsenide cells within the photovoltaic battery category will be exempt from consumption tax.
Potential Tax Benefits for Lithium Battery and Energy Storage Exports
Referencing the Provisional Regulations of the People's Republic of China on Consumption Tax, the term 'within the territory of the People's Republic of China' refers to the place of shipment or location of production, commissioned processing, or importation of consumer goods subject to consumption tax. Therefore, lithium-ion batteries consumed domestically are subject to the tax. The firm believes exports of lithium batteries and integrated energy storage systems are likely to qualify for consumption tax benefits.
Limited Overall Impact on the Battery Industry
The firm's calculations, based on a cell price of 0.40 yuan/Wh, indicate the 2% and 4% tax rates correspond to approximately 0.008 yuan/Wh and 0.016 yuan/Wh, equivalent to lithium carbonate price increases of 12,300 yuan/ton and 24,600 yuan/ton, respectively. Assuming full-year 2028 lithium battery shipments of 4,000 GWh, corresponding industry revenue would be 1.6 trillion yuan. At the 4% tax rate, the total consumption tax scale would be about 64 billion yuan. Assuming an export proportion of 30%, where the exported portion enjoys tax benefits, the effective tax scale would be approximately 44.8 billion yuan, indicating a limited overall impact on the battery industry.
Downstream Demand Impact and Beneficiaries
The firm assesses the impact on downstream demand as follows: overseas energy storage is less affected than new energy vehicles, which in turn is less affected than domestic energy storage. Companies primarily focused on overseas energy storage, such as Sungrow Power Supply Co., Ltd. and Helon Co., Ltd., will see minimal impact. Battery manufacturers like Contemporary Amperex Technology Co., Limited can partially pass the tax cost downstream to customers, making the impact manageable. The policy is seen as beneficial for high-quality industry development and leading companies. Leading battery firms possess stronger pricing power and a greater ability to pass on costs to downstream customers. Furthermore, leading companies typically have higher export ratios, cushioning them from greater impact. The policy is expected to accelerate industry capacity rationalization and promote long-term, high-quality development. Additionally, this adjustment favors the penetration of new battery technologies like sodium-ion and solid-state batteries.
Investment Recommendations
With the peak season of the second half of 2026 approaching, leading battery manufacturers are seen as having valuation safety margins and leading technological innovation in the industry chain. The firm recommends Contemporary Amperex Technology Co., Limited and suggests monitoring BYD Company Limited. Furthermore, the firm is optimistic about the continued profit recovery trend for midstream materials and the demand for HVLP copper foil driven by AI, suggesting attention on Defu Technology Group Co., Ltd., Tongguan Copperfoil Group Co., Ltd., and Taijin New Energy Co., Ltd.. Aluminum foil is expected to benefit from sodium-ion battery penetration; monitor Dingsheng New Materials (Jiangsu) Co., Ltd. and Wanshun New Material Group Co., Ltd.. The anode sector offers valuation safety margins; monitor Shangtai Technology Co., Ltd. and Zhongke Electric Co., Ltd.. The semiconductor wet electronic chemicals sector has broad space for import substitution, and hexafluorophosphate producers have related new product layouts; monitor Capchem Technology Co., Ltd. and Do-Fluoride New Materials Co., Ltd.. Lithium iron phosphate profitability is improving; monitor Fulin Precision Co., Ltd., Hunan Yuneng New Energy Battery Material Co., Ltd., and Wanrun New Energy Technology Co., Ltd.. Additionally, the firm recommends leading energy storage export companies Sungrow Power Supply Co., Ltd. and Helon Co., Ltd..
Risk Factors
Potential risks include downstream demand falling short of expectations, fluctuations in raw material prices, slower-than-expected industrialization of new technologies, and intensifying industry competition.
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