Beijing has announced plans to roll back export VAT rebates on lithium-ion batteries and key battery materials. The VAT export rebates will drop to 6% from 9% in April 2026 and eventually be eliminated entirely by Jan. 1, 2027.
The announcement has already lifted lithium prices as markets anticipate what comes next. Lithium carbonate prices in China surged to about 156,060 yuan ($21,650) per metric ton yesterday, the highest level since late 2023, per Reuters as cited by Asia Financial.
Investors expect Chinese manufacturers to speed up exports before rebates disappear, which could lift near-term battery production and lithium demand. That expectation is reshaping sentiment around the lithium industry and making investors rethink which companies are positioned to benefit and which ones may face pressure.
In the short term, Chinese battery giants like CATL and BYD are expected to benefit from a potential acceleration in exports, as higher production volumes could improve near-term revenues before rebates disappear. There’s also a silver lining for non- Chinese battery makers. South Korean and Japanese battery manufacturers have long argued that Chinese subsidies distort competition. With rebates rolling off, the playing field is set to become more balanced, allowing these suppliers to potentially regain share in the U.S. and European markets.
Meanwhile, lithium producers like Albemarle ALB, Lithium Americas LAC and Rio Tinto RIO stand to gain as China’s VAT rollback is expected to tighten global battery economics and support firmer lithium price expectations. Stronger near-term battery output could boost lithium demand sentiment, while reduced subsidies over time make non- Chinese lithium supply more strategically valuable, improving the competitive positioning of these producers in the global supply chain.
Albemarle remains one of the world’s leading lithium suppliers and is actively expanding its lithium conversion capacity and improving operational efficiency. Ongoing productivity initiatives and ramp-ups across its asset base support a stronger long-term growth profile tied to battery-grade lithium demand.
Lithium Americas offers a strategic U.S. supply story through its Thacker Pass project in Nevada, which holds the largest known lithium resource in the United States. Once developed, the project will produce up to 40,000 tons of lithium carbonate per year, enough for roughly 800,000 electric vehicles. If fully realized, this output could make the United States the world’s second-largest lithium producer.
Rio Tinto is making a serious push into lithium, aiming to become one of the world’s major producers. Last year, it acquired Arcadium Lithium, giving it access to one of the largest lithium resource bases globally. With Arcadium’s high-quality assets and broad product portfolio, Rio Tinto plans to grow capacity at its Tier 1 lithium operations to more than 200,000 tons of lithium carbonate equivalent per year by 2028.
While LAC carries a Zacks Rank #3 (Hold), RIO and ALB currently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
While miners and large battery producers are positioned to benefit, EV makers reliant on Chinese batteries could face rising costs and margin pressure. Companies like Tesla TSLA and Rivian Automotive RIVN may experience higher manufacturing costs as Chinese export pricing rises.
For Tesla, this would come at a time when the company is already navigating slower EV demand growth, aggressive price competition, and margin compression. While Tesla has strong negotiating leverage and innovation capabilities, this policy shift is not supportive of the cost structure in the near-to-medium term.
Rivian is even more sensitive to battery cost inflation than Tesla. The company is still scaling, working toward profitability, and managing capital very tightly. If battery inputs become more expensive, Rivian has fewer tools to absorb the pressure. It lacks Tesla’s scale, vertical integration and pricing power, meaning higher battery costs can slow its profitability trajectory and complicate execution.
Tesla and Rivian carry a Zacks Rank #4 (Sell) each.
In the near term, China’s policy shift is likely to create volatility. A rush to export before rebates disappear could temporarily inflate shipments and demand, support lithium prices and benefit miners — while adding margin pressure for EV manufacturers that rely on low-cost Chinese batteries.
However, once the new rebate structure takes effect, the market may see a temporary slowdown in exports as front-loaded inventory is absorbed, leading to uneven supply and price swings.
Beyond this short-term disruption, reduced subsidies could ultimately push the industry toward more rational pricing and elevate the strategic importance of non-Chinese lithium supply. For U.S. investors, the focus should be on lithium producers gaining improved sentiment and strategic relevance.
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Rio Tinto PLC (RIO) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).