China Urges WTO to Establish Panel Over India’s Auto and EV Incentive Schemes
China has officially requested the World Trade Organization (WTO) to form a panel regarding its complaint against India’s incentive programs for the automotive, battery, and electric vehicle (EV) sectors. This move comes after efforts at bilateral consultations failed to resolve the issues.
Background of the Complaint
– Nature of the Complaint: Beijing claims that India’s measures favor domestic goods over imported ones, directly discriminating against Chinese products.
– Specific Allegations:
– India’s Production Linked Incentive (PLI) schemes for advanced chemistry cell batteries, automobiles, and the promotion of electric vehicles violate global trade regulations.
– China has argued that these measures are inconsistent with India’s obligations under:
– The Subsidies and Countervailing Measures (SCM) Agreement
– The General Agreement on Tariffs and Trade (GATT) 1994
– The Trade-Related Investment Measures (TRIMs) Agreement
Timeline of Events
– Consultation Attempts: Consultations took place on November 25, 2025, and January 6, 2026. However, these discussions did not yield a satisfactory resolution.
– Request to the WTO: In a communication dated January 16, 2026, China formally requested the WTO’s Dispute Settlement Body to set up a panel to address these concerns.
India’s Incentive Schemes
China has highlighted specific incentive programs:
– Production Linked Incentive (PLI)
– National Programme on Advanced Chemistry Cell (ACC) Battery Storage
– PLI Scheme for Automobile and Auto Component Industry
– Scheme to Promote Manufacturing of Electric Passenger Cars in India
These programs aim to stimulate local manufacturing and are viewed by China as barriers to fair trade.
Implications of the Dispute
– Trade Relations: Both China and India are significant WTO members, and disputes of this nature can have broader implications for their trade relations.
– Current Trade Dynamics:
– In the last fiscal year, India’s exports to China fell by 14.5%, totaling USD 14.25 billion, while imports from China increased by 11.52%, reaching USD 113.45 billion.
– India’s trade deficit with China expanded to USD 99.2 billion in the fiscal year 2024-25.
China’s EV Market Ambitions
China’s complaints are particularly pertinent as its manufacturers seek to enhance EV exports to India, driven by the size of India’s automotive market. Recent data indicates significant exports from China, with 2.01 million electric vehicles shipped abroad in the first eight months of the year, showing a 51% increase from the previous year. However, external pressures, such as tariffs from the EU, complicate this landscape.
India’s Countermeasures
In response to the competitive landscape, the Indian government has introduced various initiatives aimed at bolstering domestic EV production:
– PLI ACC Scheme: Launched in May 2021, this scheme has a budget of ₹18,100 crore for a 50 GWh capacity over five years.
– Automobile PLI Scheme: Approved in September 2021 with an outlay of ₹25,938 crore aims to enhance domestic production and create jobs.
– New Initiatives: In March 2024, a new policy was introduced to establish India as a manufacturing hub for high-tech electric vehicles, enticing global manufacturers to invest.
Conclusion
As China presses the WTO to review India’s incentive measures, the repercussions for both countries are significant. The ongoing dispute not only highlights the complexities of international trade relations but also underscores the competitive dynamics in the rapidly evolving EV sector. Stakeholders will be watching closely to see how this situation unfolds in the coming months, particularly with the upcoming Dispute Settlement Body meeting scheduled for January 27 in Geneva.