China is phasing out tax exemptions for new energy vehicles (NEVs), impacting manufacturers like BYD.
A new consumption tax on lithium-ion batteries begins on September 1, 2026. The initial tax rate is set at 2%. The rate will reach 4% in 2027.
China will replace the full purchase tax exemption for NEVs with a 5% levy. This change takes effect in 2026.
A vehicle with a 60 kWh battery will incur higher manufacturing costs. The battery tax adds approximately 438 yuan ($62) to the price. This cost will double in 2027.
These policy changes increase financial pressure on BYD during an intense domestic price war.