On July 16, the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration jointly issued Announcement No. 20 of 2026, introducing systemic adjustments to the consumption tax policy on certain batteries. This marks the most significant policy revision since the establishment of the battery consumption tax framework in 2015, covering key categories such as lithium-ion batteries, solar cells, sodium-ion batteries, and solid-state batteries. Through a combined mechanism of “tiered tax rates + targeted exemptions + standards-based access,” it addresses the dual objectives of tax regulation and industrial guidance. 1. Lithium-Ion Batteries to Be Taxed First: 2% from September, Rising to 4% in September Next Year According to the announcement, starting September 1, 2026, conventional battery categories such as lithium-ion batteries will be subject to a 2% consumption tax rate, which will be raised to 4% from September 1, 2027. Lithium-ion batteries are the category most broadly affected by the new rules, with power batteries accounting for the vast majority of their shipments. Assuming an average battery cell price of 0.5 yuan/Wh and annual shipments of 1,000 GWh, a 2% tax rate translates to an additional annual tax burden of approximately 10 billion yuan at the cell level. At present, gross margins of power battery cell enterprises are generally compressed to around 10% or even lower, making this cost increase significant. In terms of pass-through, top-tier players, leveraging economies of scale and stronger bargaining power, are expected to pass on part of the tax burden to downstream automakers. However, second- and third-tier enterprises have limited room to negotiate, so their profit margins may come under further pressure, potentially intensifying industry divergence. After the tax rate rises to 4% in 2027, cost pressure will be significantly magnified, likely accelerating the rationalization of inefficient capacity. 2. Targeted Tax Exemptions for Frontier Technologies: Sodium-Ion and Solid-State Batteries Enjoy a “Policy Window” The announcement specifies that from September 1, 2026 to December 31, 2028, sodium-ion batteries, solid-state batteries, fuel cells, as well as perovskite, tandem, and gallium arsenide solar cells in the PV sector will be exempt from consumption tax. This arrangement directly targets frontier technology pathways that have not yet been industrialized on a large scale but hold strategic significance: Sodium-ion batteries are at a critical stage of transitioning from demonstration applications to large-scale mass production. The exemption will effectively lower the initial comprehensive production costs, narrow the cost gap with lithium-ion batteries, and accelerate their penetration in applications such as low-speed vehicles. Solid-state batteries, as the core direction for next-generation power batteries, remain in the R&D and small-batch trial production stage transitioning from semi-solid to all-solid-state. The tax exemption helps reduce trial-and-error costs and accelerate industrialization. The core logic is: tax mature technologies, and exempt frontier technologies from tax. Exempting frontier technologies that are still in the early stages of industrialization reflects a policy orientation of “using tax supplements from mature technologies to support frontier technologies, enabling them to move forward with less burden,” thereby guiding capital and resources toward technological iteration. In the short term, at the initial stage of the lithium battery consumption tax, cost side, battery cell enterprises will be under pressure and will manage by raising prices or optimizing their product mix. This cost increase is particularly erosive to the profits of second- and third-tier enterprises, and some marginal capacity may face break-even pressure. In terms of production scheduling pace, ahead of the September 1 start date, battery cell manufacturers may exhibit an “installation rush” effect involving concentrated shipments and advance stockpiling, potentially driving August production figures sharply higher in the short term, while September production schedules will face a phased pullback. In terms of price pass-through, top-tier players still have some cushion for negotiation, but smaller cell makers will face greater resistance in passing the tax burden to automakers and will need to absorb most of the costs themselves. In terms of product mix, production scheduling priorities for low-margin categories may be passively downgraded, accelerating the industry reshuffle. In the long term, after the tax rate rises to 4%, industry-wide cost pressure will be significantly magnified. Combined with the scheduled expiration of the tax exemption window for frontier technologies at the end of 2028, whether sodium-ion and solid-state batteries can achieve cost reductions at scale by then will become a critical factor in determining their competitiveness. The policy sends a very clear signal: the state’s regulatory logic for the battery industry is shifting from “universal support” to “differentiated guidance,” with technology leaders reaping greater policy dividends.

[7.21 Morning Briefing] US media reports: US-Iran conflict intensifies, the Pentagon is accelerating the deployment of F-16 and F-35 fighter jets to the Middle East. Advisor to Iran’s Supreme Leader: If US forces continue operations, Iran may shift to a full-scale offensive. The most-traded SHFE nickel 2609 contract surged in early trading then pulled back slightly, and as of the morning close, it reported 130,720 yuan/mt, down 0.13%. As the US-Iran conflict escalates, shipping restrictions in the Strait of Hormuz have strengthened sulfur cost support. However, refined nickel inventories remain difficult to reduce. Both domestic and international inventories are still at high levels, and the destocking speed is slow. In the short term, the price of the most-traded SHFE nickel contract is expected to trade within the range of 125,000-130,000 yuan/mt.

China's Ministry of Finance, General Administration of Customs and State Taxation Administration announced that, effective September 1, 2026, consumption tax policies for certain battery products will be adjusted in phases. Under the new policy, sodium-ion batteries, solid-state batteries, fuel cells, and photovoltaic batteries including perovskite, tandem and gallium arsenide cells will be exempt from consumption tax.

[SMM Tin Midday Review: US-Iran Conflict Escalation Intensified Sentiment Divergence, the Most-Traded SHFE Tin Contract Consolidated at Highs in the Morning]

SMM Nickel July 20 News: Macro and Market News: (1) US media reported that the US-Iran conflict had intensified, and the Pentagon was stepping up the deployment of F-16 and F-35 fighter jets to the Middle East. An adviser to Iran's Supreme Leader said that if the US military continued its operations, Iran might shift to a full-scale offensive phase. (2) The Ministry of Finance, the General Administration of Customs, and the State Taxation Administration issued an announcement clarifying that, starting from September 1, 2026, the consumption tax policy for some battery products would be adjusted step by step. It stated that sodium-ion batteries, solid-state batteries, fuel cells, and solar cells including perovskite cells, tandem cells, and gallium arsenide cells would be exempt from consumption tax. Spot Market: On July 20, SMM #1 refined nickel price rose 750 yuan/mt from the previous trading day. For spot premiums, the average for Jinchuan #1 refined nickel was 1,650 yuan/mt, down 100 yuan/mt from the previous trading day, while the range for mainstream domestic electrodeposited nickel brands was -300 to 500 yuan/mt. Futures Market: The most-traded SHFE nickel contract (2609) rose in early trading before pulling back slightly, closing the morning session at 130,720 yuan/mt, down 0.13%. As the conflict between the US and Iran escalated, shipping in the Strait of Hormuz was restricted, strengthening sulfur cost support. However, refined nickel inventories remained difficult to digest, with both domestic and international inventories still at high levels and destocking slow. In the short term, the price range of the most-traded SHFE nickel contract is expected to be 125,000-130,000 yuan/mt.

[7.2 Morning Meeting Minutes] Iran claims the Strait of Hormuz will not reopen under US pressure; meanwhile, according to foreign media reports, Iran has secretly ordered the Houthis to blockade the Bab el-Mandeb Strait if the US attacks power facilities. The most-traded SHFE nickel 2609 contract plunged sharply in early trading, closing the morning session at 129,450 yuan/mt, down 1.14%. Bullish macro, policy, and cost-side factors, combined with strengthening technicals, give nickel prices rebound momentum, but weak demand and high inventories continue to cap the upside room. In the short term, the most-traded SHFE nickel contract is expected to trade in the range of 127,000-133,000 yuan/mt.