In recent developments, the All-China Federation of Industry and Commerce (ACFIC) has submitted a proposal titled "Proposal on Increasing Financial and Tax Support for the Power Battery Industry." The proposal calls for immediate research into tax-related support policies for battery manufacturers before the phase-out of government subsidies. This comes as the industry faces increasing pressure due to rising costs and evolving market demands.
The proposal suggests that VAT for power battery products, currently at 17%, should be reduced to 11% for general taxpayers. It also recommends increasing the deduction rate for R&D expenses from 50% to 75%, similar to the support given to technology-based SMEs. These measures aim to ease financial burdens on companies and encourage innovation in an increasingly competitive sector.
According to a report by Daily Economic News, following recent adjustments to new energy vehicle subsidy programs by multiple ministries, power battery manufacturers are experiencing heightened cost pressures. The development threshold is becoming higher, making it more challenging for smaller players to keep up.
As the automotive industry undergoes transformation, countries like the UK, Netherlands, Norway, Germany, and France have announced plans to ban internal combustion engine vehicles by 2040. This shift highlights the growing importance of new energy vehicles (NEVs), offering China a strategic opportunity to overtake traditional automakers and transition from a major car producer to a global leader in the sector.
At the heart of this transition is the power battery, which serves as a critical component for NEVs and a focal point of international competition. The Chinese government has long recognized its strategic importance, with policy documents such as the "13th Five-Year National Strategic Emerging Industries Development Plan" emphasizing the need to build a competitive battery supply chain.
Moreover, the State Council's "Energy Conservation and New Energy Vehicle Industry Development Plan (2012–2020)" highlighted the necessity of developing a robust power battery industry. By 2020, the goal was to reach international advanced levels, and by 2025, to achieve a specific energy capacity of 500 watt-hours per kilogram.
With the recent adjustment of financial subsidy policies, stricter requirements have been imposed on power battery performance. As a result, manufacturers must invest heavily in R&D to meet these standards. However, with the withdrawal of subsidies by 2020, many Chinese battery firms are under significant financial strain.
In comparison, Japanese and South Korean companies often benefit from government-funded R&D and lower VAT rates, putting them at a competitive advantage. To maintain China’s leadership in the global power battery market, the ACFIC has urged the government to introduce supportive fiscal policies before the full withdrawal of subsidies.
These proposals include reducing the VAT on self-produced power batteries from 17% to 11%, increasing R&D expense deductions, and providing financial support for technological upgrades. Such measures are expected to help domestic companies remain competitive and secure their position in the global market.
Analysts from Industrial Securities also note that cost reduction in the power battery sector is urgent. As subsidies decrease, the entire industry must adapt quickly, and those who lead in cost efficiency will gain a significant edge in future competition.
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