China urges WTO to set up panel in case against India’s incentive schemes for auto, battery, EV

New Delhi: China has requested the WTO’s dispute settlement body to set up a panel in a case it has filed against India over New Delhi’s incentive schemes for auto, battery and electric vehicles after bilateral consultations failed to resolve the dispute.

In October last year, Beijing alleged that certain conditions in India’s Production Linked Incentive (PLI) schemes for advanced chemistry cell batteries, automobiles and the policy to promote the manufacturing of electric vehicles violate global trade rules by discriminating against Chinese goods.In a communication to the World Trade Organisation (WTO), China has stated that consultations were held on November 25, 2025, and January 6, 2026, with a view to reaching a mutually agreed solution.

Unfortunately, those consultations failed to resolve the dispute, it said.

“China therefore requests the Dispute Settlement Body to establish a panel to examine this matter,” the communication dated January 16 said.

It has also asked that this request be placed on the agenda of the next meeting of the Dispute Settlement Body, currently scheduled to be held on January 27 in Geneva.Seeking consultation is the first step of the dispute settlement process as per WTO rules. If the consultations requested by the complainant do not result in a satisfactory solution, it can request that the WTO set up a panel in the case to rule on the issue raised.Beijing, in its complaint, has stated that measures adopted by India are contingent upon the use of domestic over imported goods and discriminate against goods of Chinese origin.

These measures appear to be inconsistent with India’s obligations under the SCM (Subsidies and Countervailing Measures) Agreement, the GATT (General Agreement on Tariffs and Trade) 1994 and the TRIMs (Trade-Related Investment Measures) Agreement.

In its complaint, China has mentioned three programmes – Production Linked Incentive, National Programme on Advanced Chemistry Cell (ACC) Battery Storage, Production Linked Incentive Scheme for Automobile and Auto Component Industry, and Scheme to Promote Manufacturing of Electric Passenger Cars in India.

Both India and China are members of the World Trade Organisation (WTO). If a member country believes that a support measure under a policy or scheme of another member nation is harming its exports of certain goods, it can file a complaint under the dispute settlement mechanism of the WTO.

China is the second-largest trading partner of India.

In the last fiscal, India’s exports to China contracted 14.5 per cent to USD 14.25 billion against USD 16.66 billion in 2023-24. The imports, however, rose by 11.52 per cent in 2024-25 to USD 113.45 billion against USD 101.73 billion in 2023-24.

India’s trade deficit with China has widened to USD 99.2 billion during 2024-25.

China’s complaint about India’s reported EV subsidies comes as Beijing seeks to boost exports of its electric vehicles to India. Considering the size and scope of India’s auto market, Chinese EV automakers see it as a major source to expand sales.

According to recent reports, facing overcapacity with large production of EVs and declining domestic sales and profits amid price wars, Chinese hybrid car makers like BYD are looking for overseas markets, especially in the EU and Asia.

According to the data from China Passenger Car Association (CPCA), 50-odd EV builders of China exported a total of 2.01 million pure electric and plug-in hybrid vehicles overseas in the first eight months of the year, up 51 per cent from the same period a year earlier.

But the Chinese EV makers are facing pushback abroad as the EU has imposed a 27 per cent tariff on Chinese EVs to limit their sales in the bloc.

The Indian government has taken a host of measures, such as the electric-vehicle policy and the production-linked incentive scheme, to boost domestic manufacturing of EVs.

The government has approved the PLI ACC scheme under “National Programme on Advanced Chemistry Cell (ACC) Battery Storage” in May 2021, with an outlay of Rs 18,100 crore for 50 GWh capacity for five years after a gestation period of two years.

The scheme aims to enhance domestic cell production, reducing reliance on imports and lowering the overall costs of cell manufacturing.

In September 2021, a PLI Scheme for Automobile and Auto Components with a budgetary outlay of Rs 25,938 crore was approved by the Centre.

The scheme aims to overcome the cost disabilities to the industry for manufacturing and boost domestic manufacturing of Advanced Automotive Technology (AAT) products in India. The incentive structure is to encourage industry to make fresh investments for the indigenous manufacturing of AAT products and create additional jobs.

In March 2024, the government approved a scheme to promote India as a manufacturing destination so that e-vehicles with the latest technology can be manufactured in the country. The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers.