China vs India at WTO? How Delhi’s EV & battery subsidies sparked trade clash

China has filed a formal complaint against India at the World Trade Organization (WTO), alleging that New Delhi’s subsidies for electric vehicles (EVs) and battery manufacturing violate global trade rules and unfairly favour domestic producers. 

Beijing’s move, confirmed by officials, marks the latest in a series of similar trade disputes China has launched against other economies — including Türkiye, Canada, and the European Union — over clean-technology incentives. 

According to China’s Ministry of Commerce, India’s subsidy measures breach the WTO’s principles of national treatment and import substitution. The complaint accuses New Delhi of providing an “unfair competitive advantage” to local industries, thereby “undermining China’s legitimate interests” in global trade. 

“These measures distort fair competition and restrict the legitimate trade interests of Chinese enterprises,” Beijing said in a statement, adding that it would take “firm measures” to safeguard the rights of its domestic industries. 

India’s subsidy push for EVs & batteries 

The complaint comes as India aggressively expands its clean-energy manufacturing base through multiple government incentive programmes aimed at reducing import dependence and attracting global investment in EVs, batteries, and critical minerals. 

At the heart of these efforts lies the Production-Linked Incentive (PLI) scheme, which offers direct financial subsidies to companies manufacturing advanced automotive components and electric vehicles domestically. 

Under the PLI Scheme for the Automobile and Auto Components sector, approved in 2021 with an outlay of ₹25,938 crore, the government provides incentives of up to 18% on incremental sales to manufacturers of EVs, hydrogen fuel cell vehicles, and key components such as advanced chemistry cells (ACCs). 

A complementary PLI Scheme for Advanced Chemistry Cell Battery Storage, with an allocation of ₹18,100 crore, aims to establish 50 GWh of ACC manufacturing capacity in India. This programme has attracted bids from leading players such as Reliance New Energy, Ola Electric, and Rajesh Exports. 

The PLI Auto scheme, aimed at boosting the manufacturing of Advanced Automotive Technology (AAT) products, including EVs and components, focuses on deep localisation in India. Active from FY 2022-23 to FY 2026-27, the scheme has seen significant progress by 2025, with a cumulative investment of approximately ₹29,576 crore and the creation of 44,987 jobs. To benefit from incentives, a minimum of 50% Domestic Value Addition (DVA) is required, and as of July 2025, 106 DVA certificates had been issued.

In parallel, the PLI-ACC scheme, launched to build domestic manufacturing capacity for Advanced Chemistry Cell (ACC) battery storage, is in its five-year post-gestation phase, which began on January 1, 2025. This scheme mandates a 25% domestic value addition in the first year, which must increase to 60% within five years. Beneficiaries are also required to invest ₹225 crore per GWh of committed capacity in the first two years (2023-2024), with three firms allocated a total capacity of 30 GWh.

These policies are central to Prime Minister Narendra Modi’s “Make in India” and “Atmanirbhar Bharat” initiatives, which seek to turn India into a global hub for sustainable manufacturing while cutting its reliance on imports — including those from China, which currently dominates the global EV and battery supply chains. 

Trade deficit & Critical mineral race 

China’s complaint comes at a delicate time in bilateral relations. The two nations recently resumed limited trade and diplomatic engagement after a five-year chill, even as India’s trade deficit with China widened to $99.2 billion in 2024-25. 

Adding to the strain, reports suggest India is preparing to launch a National Critical Mineral Stockpile (NCMS) — a strategic initiative to secure supplies of rare earth elements vital for clean energy, defence, and high-tech industries. 

The programme, reportedly in the final stages of planning, will maintain a two-month reserve of key rare earth materials in collaboration with private industry. The move comes amid China’s recent export restrictions on rare earth magnets, critical components in EVs, wind turbines, and advanced electronics, which have rattled global supply chains. 

An inter-ministerial panel has also cleared a ₹7,300-crore incentive scheme to produce up to 6,000 tonnes of rare earth magnets over five years, complementing India’s domestic self-reliance agenda in critical materials. 

What happens next at WTO 

Under WTO rules, Beijing’s complaint initiates a consultation process, the first step in the dispute settlement mechanism. If consultations fail to resolve the issue within 60 days, China can request the formation of a dispute settlement panel to adjudicate the case. 

India’s Commerce Secretary Rajesh Agrawal said the government would “examine the detailed submissions made by China” before formulating a response. 

Trade experts view the move as part of an emerging global tug-of-war over clean-tech industrial policy, where nations are increasingly using subsidies and incentives to secure their share of the booming EV market.

(With inputs from PTI)