Recently, rumors about suspending approvals for new and expanded cell manufacturing projects have created significant ripples across the industry. From top level policy guidance aimed at curbing cut throat competition, to local government implementation, and the new consumption tax rules rolled out as supporting measures, a string of moves has sent clear policy signals.
Policy Guidance and Implementation
Market anxiety is not groundless.
On January 7, 2026, four authorities — the Ministry of Industry and Information Technology (MIIT), the National Development and Reform Commission (NDRC), the State Administration for Market Regulation (SAMR), and the National Energy Administration (NEA) — jointly held a symposium for the power and energy storage battery industry. The meeting proposed improving capacity monitoring and tiered early warning mechanisms to guard against overcapacity risks. In March 2026, SAMR issued a document listing lithium ion batteries among key industries targeted to rectify “involution style competition”.
Policy implementation is mainly taking shape at the local government level. According to minutes of an internal study meeting published on the official website of Zhongjiang County Government, Deyang City, Sichuan Province in June 2026, MIIT will lead a comprehensive nationwide survey on lithium battery production capacity and establish an early warning system. Specific survey methodologies and timelines have not yet been finalized. Until the mechanism is formally set up, local authorities are required to suspend administrative procedures for new power and energy storage lithium battery projects. Consumer battery and lithium material projects are exempt from these controls.
It should be noted that market participants need not panic blindly. The restrictive regulations carry well defined boundaries. Market consensus interprets the controls as targeting planned but unstarted new power /energy storage lithium battery projects. Already filed and under construction projects are not subject to this requirement.
Targeted regulation is not intended to halt industrial development, but to eliminate disorderly investment and foster sound industrial growth.
Curbing Capacity Expansion While Boosting Product Quality
As disclosed in the Zhongjiang County meeting minutes, MIIT has requested six major enterprises — CATL, BYD, Gotion High Tech, CALB, EVE Energy and Sunwoda — to take the lead in drafting holistic three year plans for intensive and efficient development. The plans must be reviewed and approved by local development reform and industry information authorities at the companies’ headquarters locations before submission to the central government for final approval and implementation. Submission deadlines and approval workflows remain undecided. Small and mid sized production capacities will face mounting competitive pressure.
According to EnergyTrend, this measure sends two critical signals. First, national authorities are granting leading enterprises with advantages in technology, capital and compliance greater power over capacity planning and industry standard setting. Going forward, decision making power over production capacity will further concentrate among top players.
Second, small and medium sized manufacturers lacking technological accumulation and scale advantages will face intensifying competition.
Capacity regulation addresses output side issues, while concurrent tax policies provide guidance on product quality.
Effective September 1, 2026, a consumption tax at a rate of 2% has been reinstated for lithium ion storage batteries. The rate is scheduled to rise further to 4% in September 2027. Sodium ion batteries, solid state batteries and fuel cells are explicitly exempted from the consumption tax.
Policy guidance is quickly propagating down the supply chain, with visible market responses emerging.
On the cell side, compounded by the reinstated consumption tax, supply side regulation, supply demand dynamics and raw material factors, leading manufacturers including CATL, EVE Energy and Lishen Battery have successively raised product prices to pass through cost pressures.
At the integration segment, energy storage system integration in the midstream bears the brunt. Integrators must absorb higher upstream cell costs while coping with repricing under revised end user bidding mechanisms. Quotations for some system integration solutions have climbed by 10% 30%.
For integrators, the old arbitrage model relying on low cost cell sourcing for simple assembly is no longer viable. The industry is pushing the integration segment toward technology oriented players equipped with high safety performance, high efficiency and sophisticated algorithm capabilities.
The energy storage industry is not stalling. Instead, disorderly capacity expansion within lithium ion cell manufacturing is being constrained, shifting the sector from rampant growth toward high quality development. Suspending approvals for new projects installs a safety belt for the fast expanding industry. Supporting leading enterprises and granting tax preferences to next generation technologies accelerates technological iteration.
As the national capacity early warning mechanism is established and implemented, business models built purely on low cost cell driven price competition will keep shrinking. Companies capable of upgrading existing assets, holding next generation technology reserves and maintaining global footprints will achieve more sustainable and robust growth.
Source：EnergyTrend
