China Takes India’s Auto and EV Incentives to WTO, Seeks Dispute Panel

China has asked the World Trade Organisation (WTO) to set up a dispute settlement panel against India over its incentive schemes for automobiles, batteries and electric vehicles (EVs), after bilateral talks failed to resolve the issue.

In a communication dated January 16, China said it held consultations with India on November 25, 2025, and January 6, 2026, as required under WTO rules. However, the discussions did not lead to a mutually agreed solution. Beijing has now requested the WTO’s Dispute Settlement Body (DSB) to establish a panel to examine the case. The request is expected to be placed on the agenda of the next DSB meeting on January 27 in Geneva.

What the dispute is about

The dispute centres on India’s Production Linked Incentive (PLI) schemes and related policies covering:

• Advanced Chemistry Cell (ACC) batteries

• Automobiles and auto components

• Electric vehicles

• Electric passenger car manufacturing

China argues that certain conditions under these schemes favour domestically produced goods and discriminate against imported products, including those from China.

According to China, these measures may violate India’s commitments under key WTO agreements, including:

• The Subsidies and Countervailing Measures (SCM) Agreement

• The General Agreement on Tariffs and Trade (GATT) 1994

• The Trade-Related Investment Measures (TRIMs) Agreement

Trade tensions in the background

The WTO case comes at a time of strained trade relations between the two countries. China is India’s second-largest trading partner, but trade remains heavily imbalanced. In 2024–25, India’s exports to China fell 14.5% to USD 14.25 billion, while imports rose 11.52% to USD 113.45 billion, pushing India’s trade deficit with China to USD 99.2 billion.

EV push and global competition

China’s challenge also coincides with its push to expand overseas sales of electric vehicles amid overcapacity and intense price competition at home. Chinese automakers, including BYD, have been targeting overseas markets in Asia and Europe. Data from the China Passenger Car Association shows that Chinese manufacturers exported about 2.01 million pure electric and plug-in hybrid vehicles in the first eight months of the year, marking a 51% year-on-year increase.

However, Chinese EV makers are facing growing resistance globally. The European Union has recently imposed tariffs of up to 27% on Chinese electric vehicles.

India’s manufacturing push

India, meanwhile, has been strengthening its policies to boost domestic EV manufacturing and reduce import dependence. The ACC Battery Storage PLI scheme, approved in May 2021 with an outlay of ₹18,100 crore, aims to support 50 GWh of battery manufacturing capacity. In September 2021, the government also approved a ₹25,938 crore PLI scheme for automobiles and auto components to promote advanced automotive technologies.

More recently, in March 2024, India cleared a new policy to attract global EV makers and position the country as a manufacturing hub for electric vehicles.

With China now pushing the matter to a WTO panel, the dispute could have wider implications for India’s EV strategy and the global debate over industrial subsidies and local manufacturing incentives.