Why has the industry been calling for the abolition of the consumption tax on lead storage batteries for many years been delayed?

The price of a set of 60-volt 45-amp lead acid batteries is about 300 yuan and contains a 4% consumption tax. At first glance, the amount is not large, but it adds up to a large amount of expenditure.

"In the manufacturing industry, lead batteries are one of the few that is subject to consumption tax. Over the years since the implementation of the consumption tax collection policy, companies have made strong calls for a halt, with strong opinions and many disputes from all walks of life." Recently, Liu Yi, deputy general manager of Hengyang Ruida Power Supply, said in an interview with a reporter from China Energy News that with the strengthening of national supervision and the self-drive of the industry to reduce costs and increase efficiency, lead storage battery production technology, processes and equipment have been significantly optimized, and the resource recycling rate has reached more than 99%. It has bid farewell to the "high pollution, high emission" label, and it is unreasonable to continue to impose consumption tax on lead storage batteries.

Liu Yi believes that China is a major producer and exporter of lead batteries, and lead batteries still occupy an important position in low-speed electric vehicles, energy storage systems, UPS, data centers and other fields. In order to help the high-quality development of the industry, the time is ripe to stop the consumption tax on lead storage batteries.

The industry has undergone earth-shaking changes

Unenvironmentally friendly and highly polluting-this was the label of lead storage batteries. In the past few years, driven by the surge in demand for low-speed electric vehicles, some workshop-style "low-small-scattered" enterprises have quickly "emerged". Lead dust and acid mist are directly discharged without purification and waste acid water are discharged without treatment. Environmental pollution is shocking and deeply stung the nerves of society.

Take decisive measures to do a good job in source management. The Ministry of Industry and Information Technology has established a list of enterprises with standardized conditions in the lead storage battery industry, and starting from January 1, 2016, a consumption tax will be levied on lead storage batteries at a rate of 4% to reduce or limit the high energy consumption and high pollution of the lead storage battery industry, and advocate energy conservation, environmental protection, and green development.

"At that time, industry demand surged, and standards and management measures were difficult to put in place immediately. There were some irregular behaviors in the production process, which dragged down the development of the entire industry." Liu Yi pointed out that the consumption tax on lead storage batteries has played a positive guiding role to a large extent, forcing the accelerated elimination of "low and small bulk" production enterprises.

"At the same time, the competent authorities have formulated corresponding management measures in terms of process equipment, environmental protection, occupational health, energy conservation and recycling, etc., and formed a complete indicator system. It can be said that the excessive development of lead storage batteries has been reversed, and the industrial concentration has been greatly increased. The number of employing companies has been reduced from more than 2000 to about 300. There have been significant improvements in technological transformation and production processes." Liu Yanlong, former secretary-general of the China Chemical and Physical Power Supply Industry Association, told the China Energy News reporter.

"After years of rectification, the lead battery industry has undergone earth-shaking changes." Liu Yi said that the environmental protection level of China's lead battery industry has been significantly improved. Through rectification of backward production capacity and factory health protection distances that do not meet requirements, the survival of the fittest has been basically completed, pollution problems have been basically solved, and some enterprises have achieved ultra-low emissions., even ultra-low emissions. The consumption tax on lead batteries has completed its mission of curbing the production and consumption of highly polluting lead batteries.

There is huge operating pressure

However, the consumption tax has actually increased the cost burden of enterprises. Data shows that from 2016 to 2022, the consumption tax payment amount of the lead storage battery industry exceeded 37 billion yuan, with an average annual tax payment of approximately 5.3 billion yuan. Lead acid battery companies have low profit margins, and their main business profit margins have been in the low range of 2%-4% for many years. Driven by interests, some small companies have tax evasion, which not only fails to solve environmental problems, but also promotes "bad money drives out good money."

Liu Changlai, chairman of Camel Co., Ltd., reflected that the negative impact of the lead battery consumption tax on the industry is no longer conducive to the high-quality development of enterprises. Take Tianneng and Camel, the industry's leading companies, as examples. In 2022, they will pay consumption taxes of 1.29 billion yuan and 313 million yuan respectively, accounting for 35.8% and 20% of their respective total tax payments, and their net profit margins are 4.39% and 3.4%, respectively. Enterprise economic benefits have been running at a low level for a long time.

In recent years, the living space of lead batteries has been continuously squeezed. "The profits of many companies have not yet reached 4 points. Under the impact of the rapid development of lithium batteries, the pressure for the survival and development of lead battery companies has increased." Liu Yi said that lead batteries are a heavy-asset industry, and investment in production equipment, technical reserves, processes, environmental protection, etc. is very large. Consumption tax has dragged down corporate R & D innovation and market competition to a certain extent.

Liu Changlai further stated that lead batteries for automobile starting are core components of automobiles, and there is a problem of duplicate collection of automobile consumption tax and lead battery consumption tax. "Among the existing consumption tax items, consumption taxes ranging from 3% to 20% are levied on passenger cars and medium and light commercial vehicles with different displacements. Each vehicle is equipped with at least one lead starting battery, and the battery has already paid a 4% consumption tax when sold to the main engine factory."

It is unclear whether it can be cancelled

Various technical routes bloom and compete for development, which is the development characteristics and basic strategy of China's battery industry. Despite the impact of lithium batteries, lead batteries occupy an important position in low-speed electric vehicles, energy storage systems, and data centers based on the advantages of low price, safe use, and high regeneration rate.

So, why has the industry been calling for many years to cancel the consumption tax on lead storage batteries, been delayed?

"The competent authorities are also very conflicted." Industry insiders admit that the pollution in the manufacturing process of key lead battery enterprises has been fundamentally improved, but cases of environmental pollution caused by illegal collection and disposal of waste lead battery still occur from time to time. "Policies cannot be changed overnight. Moreover, lead pollution has caused adverse social impacts."

In May last year, the Supreme People's Procuratorate, the Ministry of Public Security, and the Ministry of Ecology and Environment jointly issued a typical case of severely punishing the crime of hazardous waste polluting the environment in accordance with the law. One example showed that between 2018 and July 2020, the defendant did not obtain a hazardous waste business license. In the case of using the name of a company that had obtained a hazardous waste business license, he successively hired others to purchase it in relevant factories, courtyards or groves in Dongmaquan Town, Wuqing District, Tianjin City. Disassemble waste lead storage batteries, and discharge the acid collected from dismantling batteries into soil or public drainage systems without anti-seepage measures through seepage pits, sewers, etc. After testing, the lead content and acid value of many soils are significantly higher than normal soil, and they have been seriously polluted.

According to a reporter from China Energy News, lead battery pollution mainly occurs in the production and recycling processes. Lead gas, lead dust and wastewater emissions generated during the production process must be treated in accordance with environmental protection standards. Lead recycling has great economic value. Many small businesses and small workshops are willing to engage in recycling work, but they often lack the necessary recycling equipment and technology. They are roughly disassembled and directly poured acid liquid to remove lead plates, which produces acid pollution. According to relevant regulations, waste lead batteries are hazardous waste, and units engaged in business activities of collecting, storing, utilizing and disposing of hazardous waste should apply for a license.

The top priority is to strengthen supervision

Zhang Tianren, chairman of Tianneng Holding Group, believes that solving energy conservation and environmental protection issues should still be achieved through means such as improving national regulations and strengthening supervision by government functional departments. Environmental pollution cases in the lead storage battery industry are mainly caused by "lack of regulations, lack of supervision, poor management, and insufficient understanding". It is not a problem of the battery product itself. As long as supervision is in place at every link, it will not cause pollution risks to the environment.

"At present, regular lead storage battery recycling companies are 'not enough to eat' and the problem of low capacity utilization is more prominent. However, some small, scattered, poor factories and even illegal workshops have low operating costs and can seize retired battery resources at high prices. Many batteries flow to small factories. This has also increased the survival pressure on formal enterprises." In Liu Yanlong's view, the top priority for the development of the lead battery industry is to improve laws and regulations, extend the producer responsibility system, and significantly increase illegal costs. By establishing a traceability system and other methods, closed-loop supervision of the entire process from source production, mid-end use to end-end collection, transportation and recycling can be achieved, further improving the management level of lead storage batteries. Enterprises should also increase technology research and development efforts, solve the shortcoming of low specific energy, and improve the competitiveness of lead battery products. At the same time, it is recommended to introduce implementation measures for capacity replacement in the recycled lead industry to shut down those that do not meet the "Regulations and Conditions for the recycled lead industry", especially those that are inefficient and backward production capacity, to promote the healthy development of the recycled lead industry.

China is the world's largest producer and exporter of lead storage batteries. In 2022, the output of lead-acid batteries will be 216.5 million volt-ampere hours, accounting for one-third of the world's total. The export volume will be 216 million units, with a total amount of US$3.903 billion. The development advantages of the lead battery industry should not be given up.

Liu Changlai suggested that priority should be given to eliminating the consumption tax on lead batteries for car starting based on the work experience of eliminating the consumption tax on automobile tires. At the same time, enterprises that have implemented the extended producer responsibility system, established a complete waste lead battery recycling system, supported corresponding information management systems, and monitored and managed the entire recycling process are exempted from battery consumption tax.

Zhang Tianren suggested that the battery consumption tax rate could be reduced by 1 to 2 percentage points. At the same time, lead storage batteries, an important component of electric bicycles, will be included in the catalog of nationally encouraged export products, and will enjoy the same export tax refund policy as lithium batteries. Reduce enterprise export costs, improve the international competitiveness of products, and further stimulate the enthusiasm of enterprises to "go global".

"The development pattern of the lead storage battery industry has stabilized, and it is difficult to experience explosive growth. On the one hand, enterprises must maintain the existing stock, and on the other hand, make some increments to develop towards high-quality." Liu Yi said that being more refined, better, safer and lower cost are the competition and future development trends in the lead battery market, and competitiveness can be improved through strong technological innovation.

Wen| Our reporter Lu Qixiu