China bets on sodium-ion and solid-state batteries to win next-gen EV race

China has developed a successful strategy for winning technology races: set a promising tech as a priority and develop it at breakneck pace via subsidies or tweaking the tax code in its favor until everyone follows. It did it with renewable energy, electric vehicles, and even AI and is now doing it with the next generation of battery technologies.

It basically picks the future chemistry it wants to dominate, like with lithium-ion cells starting in 2015, and a decade later, it is their undisputed global leader in both raw material and component production. Now, according to a fresh announcement from China's Ministry of Finance, the General Administration of Customs, and the State Taxation Administration, it's doing it again, this time setting sodium-ion and solid-state batteries as a priority.

Solid-state and sodium-ion batteries become tax-exempt

Starting September 1, 2026, lithium-ion batteries will face a 2% consumption tax, rising to 4% a year later. That ends an exemption that has stood for more than a decade and helped Chinese cell makers scale into the dominant global suppliers they are today. It's a signal that the government considers lithium-ion mature enough to tax it like any other commoditized product.

Sodium-ion and solid-state batteries, on the other hand, are now exempt from the tax through the end of 2028 despite having been subject to a 4% consumption tax ever since 2015, since they weren't on the original exemption list. That's a rather telltale reversal, and it comes as CATL, BYD, and many others are set to begin pilot solid-state manufacturing lines, while China just developed the first global solid-state battery standard.

That pattern may look familiar to anyone who watched China's EV subsidies over the past decade. Instead of picking winners through direct grants that would've been against WTO rules, China bent the cost curve, making the technology it wants cheaper to produce and buy than the one it deemed obsolete.

For sodium-ion, whose main appeal has always been cost and supply chain independence from lithium, a tax break widens those advantages even further as it now reaches cost and energy density parity with LFP cells. Sodium-ion technology is now even offered to retail buyers as a replacement for their old lead-acid one, like the Napow 50 Ah 12V car battery that is currently discounted on Amazon.

Solid-state batteries, on the other hand, which CATL says are still a few years away from mass production, can use the tax exemption as a down payment on a manufacturing base that China intends to dominate before other countries. Battery startups in China are, in fact, skipping the lithium or liquid electrolyte stage, where they stand no chance against established players like CATL or BYD, and jumping directly to solid-state or sodium-ion cells, so the future EV battery landscape may look completely different a few years from now.