Last October, Beijing claimed that specific conditions within India’s Production Linked Incentive (PLI) schemes for advanced chemistry cell batteries, automobiles, and the promotion of electric vehicle manufacturing breach international trade regulations by favoring domestic over Chinese products.
In a submission to the World Trade Organisation (WTO), China noted that discussions took place on November 25, 2025, and January 6, 2026, aimed at reaching an amicable resolution.
Regrettably, those discussions did not resolve the issue, it stated.
“China thus requests the Dispute Settlement Body to form a panel to scrutinize this matter,” the communication dated January 16 indicated.
Additionally, it has requested this item to be added to the agenda for the upcoming Dispute Settlement Body meeting, slated for January 27 in Geneva.
Initiating consultations marks the initial step of the dispute resolution process as per WTO regulations. If the consultations initiated by the complainant do not yield a satisfactory outcome, a request can be made for the WTO to form a panel to adjudicate the issue at hand.
In its grievance, Beijing has asserted that India’s measures are based on the preference for domestic goods over imported ones, thus discriminating against products from China.
These measures seem to contradict India’s commitments 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.
China’s complaint references three initiatives: Production Linked Incentive, National Programme on Advanced Chemistry Cell (ACC) Battery Storage, and the 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 mechanism under another member’s policy or scheme is adversely impacting its exports of specific goods, it can lodge a complaint under the WTO’s dispute resolution framework.
China ranks as India’s second-largest trading partner.
In the previous fiscal year, India’s exports to China plummeted by 14.5 percent to USD 14.25 billion, down from USD 16.66 billion in 2023-24. Conversely, imports surged by 11.52 percent in 2024-25 to USD 113.45 billion, compared to USD 101.73 billion in 2023-24.
India’s trade deficit with China has expanded to USD 99.2 billion during 2024-25.
China’s complaint regarding India’s reported EV subsidies comes as Beijing aims to enhance the export of its electric vehicles to India. Given the scale of India’s automotive market, Chinese EV manufacturers view it as a critical opportunity for growing sales.
Recent reports indicate that, facing overproduction in the EV sector and declining domestic sales amid price competition, Chinese hybrid vehicle manufacturers like BYD are seeking international markets, particularly within the EU and Asia.
Data from the China Passenger Car Association (CPCA) reveals that around 50 Chinese EV manufacturers exported a total of 2.01 million pure electric and plug-in hybrid vehicles in the first eight months of the year, marking a 51 percent increase compared to the same period last year.
However, these Chinese EV producers are encountering resistance abroad, as the EU has imposed a 27 percent tariff on Chinese electric vehicles to restrict their sales within the bloc.
The Indian government has implemented various measures, including the electric vehicle policy and the production-linked incentive scheme, to stimulate domestic EV manufacturing.
The government sanctioned the PLI ACC scheme under the “National Programme on Advanced Chemistry Cell (ACC) Battery Storage” in May 2021, with an allocation of Rs 18,100 crore for a production capacity of 50 GWh over five years, following a two-year gestation period.
This initiative aims to boost domestic battery production, diminishing dependence on imports and lowering the overall costs of cell manufacturing.
In September 2021, the Centre approved a PLI Scheme for Automobiles and Auto Components with a budget allocation of ₹25,938 crore.
The scheme intends to mitigate cost disadvantages in the industry for manufacturing and to enhance domestic production of Advanced Automotive Technology (AAT) products in India. The incentive framework is designed to motivate the industry to invest in indigenous AAT product manufacturing, leading to job creation.
In March 2024, the government approved a scheme to position India as a manufacturing hub, promoting the production of cutting-edge electric vehicles domestically. This policy is aimed at attracting investments from prominent global EV manufacturers.
