From the factory floors in Shenzhen to convenience store shelves in London, the price tags on vapes are being rewritten—quietly, but unmistakably.
In 2025, Smoore International’s gross margin slid from its peak of 53.6% down to 34.1%. Boton’s overall margin took an even sharper hit, falling from 36.2% to 25.2%. These aren’t just numbers in an earnings report. They’re signals that the once-fat profits in the vaping industry are being systematically squeezed.
And the pressure keeps mounting. Japan is raising its tobacco tax from April 1. The UK will start taxing vapes this October. China just scrapped its 13% export rebate on vapes. Add in Middle East tensions driving up both raw material and shipping costs, and you’ve got a perfect storm.
Margins Are Shrinking Across the Board
The golden days of vaping seem to be fading. Smoore’s gross margin has been on a steady decline since 2021. Changjiang Securities points the finger at a changing product mix: high-margin atomization products are taking a backseat, while lower-margin alternatives—especially those rushed out to meet new European regulations—are taking up more of the revenue pie.
It’s not just Smoore. China Boton’s gross margin dropped from 36.2% to 25.2% in a single year, with the company citing rising material and labor costs alongside falling revenue.
What’s behind the shift? Europe’s crackdown on disposables forced manufacturers to pivot quickly. Smoore helped its clients roll out compliant replacements, and while that drove a 38.5% jump in its European to B revenue (to 7.06 billion yuan), it also dragged down overall margins. In short, they sold more, but earned less on each unit.
Japan’s Tax Hike Sends Ripples Worldwide
Japan’s move to raise tobacco taxes starting April 1 isn’t just a local story. It’s part of a broader push to fund a defense buildup, with a second tobacco tax hike set for October and personal income tax increases coming in 2027. Heated tobacco products will now be taxed at the same rate as traditional cigarettes—15.244 yen per stick.
Philip Morris Japan and Japan Tobacco have already announced price increases: IQOS Terea will go from 580 to 620 yen, and Ploom products will rise by 20–30 yen. And there’s more to come—an additional 0.5 yen per stick annually over three years starting in 2027.
For China’s vape manufacturers, this matters. Japan is a major market for heated tobacco, and any tax-driven demand shift there will ripple back through the supply chain.
China Pulls the Export Rebate Rug
On January 8, 2026, Beijing announced it would cancel the 13% VAT export rebate for vapes, effective April 1. That means manufacturers will have to absorb the tax themselves, adding an estimated 3–5% to export costs.
The affected categories include everything from disposables and pods to e-liquids and hardware. According to customs data, China’s vape exports totaled roughly $10.9 billion in 2024 and about $9.6 billion in the first 11 months of 2025. The bulk of that—$8.21 billion in 2024—fell under the HS code for nicotine-containing products.
TF Securities says the rebate cut will ultimately help large, compliant players consolidate their lead. But in the short term, as Guojin Securities points out, even giants like Smoore—which still produce mostly in China—will feel the pinch.
Meanwhile, Beijing has also raised the profit remittance ratio for state-owned tobacco enterprises to 35%, a sign that the government is looking for new revenue streams.
The UK’s New Tax Stamp Regime
The UK is rolling out its own vape tax starting October 1, 2026. The levy is straightforward: £2.20 per 10ml of e-liquid, nicotine or not. A new tax stamp system will be enforced, with a six-month grace period. From April 2027, any unstamped product will be banned from sale.
The UK’s Independent British Vape Trade Association isn’t happy about it. They warn that higher prices could slow the shift from smoking to safer alternatives, hitting low-income users hardest. Still, they’re working with regulators to smooth implementation—and calling for stricter enforcement after 2027 to protect legitimate businesses.
Middle East Turmoil Adds the Final Straw
Then there’s the situation in the Middle East. The Strait of Hormuz—through which 20–30% of global seaborne trade passes—has become a flashpoint. Major carriers like MSC and Maersk have suspended routes, forcing ships to detour around the Cape of Good Hope. That adds 10–15 days to a typical Shenzhen-to-Dubai run, stretching delivery from 25 days to over 40.
Costs are exploding. War risk surcharges, emergency contingency fees, and higher fuel prices have pushed container freight rates up 150–250%. And that’s just shipping. Crude oil prices are climbing, which directly drives up the cost of PG, VA, and cooling agents—key ingredients for vape liquids.
Air freight isn’t immune either. About 30–40% of China-to-Europe vape air cargo relies on hubs in Doha, Dubai, and Abu Dhabi. Any escalation involving Iran could disrupt those transit points, forcing carriers like Qatar Airways, Emirates, and Etihad to adjust schedules. Higher jet fuel costs will inevitably trickle down via fuel surcharges.
Who Survives the Shakeout?
All these pressures are forcing a brutal industry reset. Small players are running out of room. Between the lost export rebate, the UK’s tax stamp, and the soaring logistics costs, staying compliant has never been more expensive. A single PMTA application to the US FDA costs millions of dollars—and most are rejected. That turns the US from an opportunity market into a high-risk, high-compliance minefield.
The big players are adapting. Smoore says it will invest in advanced automation to cut labor costs and boost efficiency. Boton has just finished a new factory complex in Huizhou, with fixed assets worth around 400 million yuan.
But for the rest? The message is clear: the era of cheap vapes is over. Higher prices are coming, and not everyone will make it through.