China Files WTO Dispute Against India Over EV Subsidies
Beijing alleges India’s incentive schemes for the auto, battery, and electric vehicle sectors violate global trade rules.
China has formally requested the World Trade Organization’s (WTO) dispute settlement body to establish a panel to examine India’s incentive programs for the automotive, battery, and electric vehicle (EV) industries. The move follows unsuccessful bilateral consultations aimed at resolving concerns that the programs discriminate against Chinese goods.
According to a communication submitted to the WTO on January 16, China alleges that certain conditions within India’s Production Linked Incentive (PLI) schemes – specifically those targeting advanced chemistry cell batteries, automobiles, and EV manufacturing – contravene international trade regulations. “China therefore requests the Dispute Settlement Body to establish a panel to examine this matter,” the communication stated. The request is scheduled to be considered at the next meeting of the Dispute Settlement Body on January 27 in Geneva.
The dispute centers on claims that India’s measures are contingent upon the use of domestically produced goods over imports, effectively disadvantaging Chinese manufacturers. Beijing asserts these policies are inconsistent with India’s obligations under the Subsidies and Countervailing Measures (SCM) Agreement, the General Agreement on Tariffs and Trade (GATT) 1994, and the Trade-Related Investment Measures (TRIMs) Agreement.
Specifically, China has raised concerns regarding three programs: the Production Linked Incentive scheme, the National Programme on Advanced Chemistry Cell (ACC) Battery Storage, the Production Linked Incentive Scheme for Automobile and Auto Component Industry, and the Scheme to Promote Manufacturing of Electric Passenger Cars in India.
The escalation of this trade dispute comes as China seeks to expand its EV exports, with India’s substantial automotive market representing a key target. Chinese EV manufacturers, including BYD, are actively exploring overseas opportunities amid overcapacity and declining domestic sales. Data from the China Passenger Car Association (CPCA) reveals that Chinese EV builders exported 2.01 million pure electric and plug-in hybrid vehicles in the first eight months of the year, a 51% increase year-over-year.
However, Chinese EV makers are encountering resistance in international markets. The European Union, for example, has imposed a 27% tariff on Chinese EVs to curb their market share within the bloc.
India, meanwhile, has been proactively implementing policies to bolster its domestic EV manufacturing capabilities, including the aforementioned PLI schemes. The PLI ACC scheme, approved in May 2021, allocates Rs 18,100 crore (approximately $2.2 billion USD) for 50 GWh of battery storage capacity over five years. A separate PLI scheme for the automobile and auto component industry, approved in September 2021, carries a budgetary outlay of Rs 25,938 crore (approximately $3.1 billion USD) and aims to incentivize investment in Advanced Automotive Technology (AAT) products. In March 2024, the government further approved a scheme to attract investment in the e-vehicle space from global EV manufacturers.
The widening trade deficit between India and China – reaching $99.2 billion in 2024-25 – adds another layer of complexity to the situation. While India’s exports to China contracted by 14.5% to $14.25 billion in the last fiscal year, imports from China rose by 11.52% to $113.45 billion.
As both nations are members of the WTO, the dispute will now proceed through the organization’s formal dispute settlement mechanism. This process begins with consultations, and if those fail to yield a resolution, a WTO panel will be convened to rule on the merits of the case. The outcome could have significant implications for the future of trade in the rapidly evolving EV sector.
