China Initiates WTO Panel Against India Over Auto, Battery, and EV Incentives Amid Trade Dispute

China has intensified its trade conflict with India by requesting the World Trade Organization (WTO) to establish a dispute settlement panel. This move follows unsuccessful bilateral consultations regarding India’s incentive schemes for automobiles, batteries, and electric vehicles. In a formal communication, China indicated that discussions held on November 25, 2025, and January 6, 2026, did not yield a resolution, prompting this latest action.

Details of the Dispute

The core of the dispute revolves around a complaint China filed in October 2025. China alleges that India’s Production Linked Incentive (PLI) schemes for advanced chemistry cell batteries, automobiles, and electric vehicles violate global trade regulations by favoring domestic products over imports. According to China, these measures discriminate against Chinese goods, which they argue is inconsistent with India’s commitments under various international trade agreements, including the Subsidies and Countervailing Measures (SCM) Agreement and the General Agreement on Tariffs and Trade (GATT) 1994.

In its complaint, China specifically references three programs: the Production Linked Incentive scheme, the National Programme on Advanced Chemistry Cell (ACC) Battery Storage, and the PLI Scheme for the Automobile and Auto Component Industry. These programs are designed to promote local manufacturing but have raised concerns in Beijing regarding their compliance with WTO rules.

WTO Process and Implications

Seeking consultations is the initial step in the WTO dispute resolution process. If these consultations do not lead to a satisfactory agreement, the complainant can request the establishment of a panel to adjudicate the matter. China’s request for a panel is set to be discussed at the next Dispute Settlement Body meeting scheduled for January 27 in Geneva. This escalation could significantly heighten trade tensions between the two nations, both of which are members of the WTO.

The panel process, if initiated, may take several months to reach a conclusion. This timeline could impact ongoing trade negotiations and economic relations between India and China, which are already strained.

Trade Dynamics Between India and China

India and China maintain a complex trading relationship, with China being India’s second-largest trading partner. However, the trade balance heavily favors China. In the fiscal year 2024-25, India’s exports to China decreased by 14.5% to USD 14.25 billion, while imports surged by 11.52% to USD 113.45 billion, resulting in a trade deficit of USD 99.2 billion.

China’s request for a WTO panel comes at a time when it is seeking to expand its electric vehicle (EV) market internationally. Chinese manufacturers, such as BYD, are exploring opportunities in Asia and Europe, despite facing challenges like a 27% tariff on EV imports imposed by the European Union. This context adds another layer of complexity to the ongoing trade dispute.

India’s Response and Policy Measures

In response to the challenges posed by international competition, India has implemented several policy measures aimed at bolstering domestic manufacturing. The government approved the PLI ACC Battery Storage scheme in May 2021, allocating Rs 18,100 crore for its implementation. This was followed by the PLI scheme for automobiles and auto components in September 2021, which received a budgetary allocation of Rs 25,938 crore. Additionally, in March 2024, India introduced a policy to attract global EV manufacturers to establish production facilities within the country.

These initiatives reflect India’s commitment to enhancing its manufacturing capabilities and reducing reliance on imports. However, the ongoing trade dispute with China could complicate these efforts, as both nations navigate the challenges of global trade dynamics.

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