[SMM Analysis] China's EV Battery Output Surges 10% in July, Growth May Slow Post-September Due to New Tax Policy

In July, China’s EV battery cell output rose about 10% MoM, with LFP technology continuing to serve as the primary driver of growth. Demand side, new car models kept increasing vehicle battery capacity, while accelerating commercial vehicle electrification jointly lifted power battery cell demand. Among these, LFP power batteries, leveraging cost advantages and safety, saw further penetration rate gains in both passenger and commercial vehicle segments, becoming a key force in the overall output expansion.

Notably, expectations of the formal battery consumption tax taking effect in early September had a certain pull-forward effect on production schedules for July–August. Some battery companies and automakers stepped up stockpiling ahead of the policy window to reduce subsequent tax costs. Against this backdrop, August power battery cell production schedules are expected to maintain a robust growth rate of around 8% MoM for both LFP and ternary power battery cells, supported by peak-season stockpiling and the “consumption tax rush.”

Looking ahead, as the “installation rush” effect gradually fades, the pace of power battery cell production scheduling in September is expected to slow, with MoM growth possibly retreating to the 5%–6% range. In the longer term, once the consumption tax policy is implemented, all segments of the battery industry chain will face a new round of cost pass-through and price competition, and enterprises’ production planning strategies will shift from “policy-driven” to “demand-driven,” with the market poised to enter a new rebalancing phase.