China cuts VAT rebates on battery exports
In early 2026, China’s Ministry of Finance and State Taxation Administration announced changes to the value-added tax (VAT) rebate policy that will affect exported battery products, including cells and modules used in energy storage systems. Under the updated policy, rebates for certain lithium-ion battery products will be reduced or eliminated, meaning exporting manufacturers will no longer receive the same level of tax refunds as before.
The move is part of a broader trend of adjusting export subsidies and reallocating fiscal incentives toward domestic industrial upgrading, clean energy deployment, and strategic supply chain priorities. While the recalibration aims to support domestic electrification and technology value chains, it will also increase the effective cost of battery exports over time.
Export cost pressure and competitive impacts
Industry observers expect that with VAT rebates cut, China-based cell and pack exporters will face higher net costs, reducing the price advantage they have historically enjoyed in overseas markets. This could have several knock-on effects:
-
Export pricing pressure: Manufacturers may need to raise overseas prices or absorb margin compression.
-
Contract renegotiations: Long-term supply agreements may be revisited, especially for projects with tight price tolerances.
-
Shift in competitive dynamics: Suppliers outside China with stable domestic cost structures may become more competitive in certain regions.
Analysts suggest that the policy change may improve profitability and capacity discipline for Chinese producers while pushing global customers to reevaluate procurement strategies amid gradually rising effective unit costs.
BasenPower Commentary: what this means for storage supply and projects
From BasenPower’s perspective, the VAT rebate cut in China sends several important signals for global energy storage procurement and project structuring:
1. Strategic sourcing becomes more critical
Battery price competitiveness has been a major driver of storage project economics, but with export cost pressure rising, developers should increasingly weigh other factors beyond nominal $/kWh pricing — such as supplier reliability, warranty strength, lifecycle performance, and multi-vendor strategies. Relying on a single low-price source may expose projects to policy-driven cost volatility.
2. Supplier selection must balance cost, quality and certainty
As China’s relative export cost advantage softens, suppliers in other regions — including Asia-Pacific, Europe, and North America — may become more attractive when quality, logistics, compliance and service reliability are factored into total cost of ownership (TCO) models.
3. Long-term contracts and hedging may mitigate risk
For utility-scale or long-lead projects planned through 2027–2028, locking in multi-year supply agreements with price stability clauses could help hedge against cost increases resulting from VAT rebate changes, exchange rate fluctuations, or raw material price shocks.
In BasenPower’s view, the policy shift is not a short-term disruption but a signal of market maturation: as storage markets grow, pricing will increasingly reflect total value and performance reliability, rather than being driven primarily by short-term subsidy-enabled cost advantages.