Beijing views these incentives as import-substitution subsidies, which the WTO prohibits, and gives India an unfair competitive advantage.
15 Oct 2025 | 2118 Views | By Kiran Murali
At a time when automotive and cell manufacturing industries are pushing the government for more incentives for localisation, China has raised a complaint against India at the World Trade Organization (WTO), alleging that New Delhi's subsidies for electric vehicle (EV) and battery cell manufacturing violate global trade rules.
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At a time when automotive and cell manufacturing industries are pushing the government for more incentives for localisation, China has raised a complaint against India at the World Trade Organization (WTO), alleging that New Delhi's subsidies for electric vehicle (EV) and battery cell manufacturing violate global trade rules.
According to a statement from China’s commerce ministry, China on Wednesday requested consultations with India at the WTO regarding India's subsidy measures in the electric vehicle and battery sectors. Requesting consultations is the first step in the WTO dispute settlement process.
Indian provides subsidies for faster adoption of electric vehicles and supply chain localisation through PM E-Drive and production-linked incentive (PLI) schemes for auto, components and cell manufacturing. These incentives are linked to domestic value addition criteria, which mandate a certain level of localization and domestic manufacturing within a product.
China suspects that these subsidies violate India's WTO obligations, alleging violations of the national-treatment clause and several other rules. Beijing sees these incentives as import-substitution subsidies, which the WTO prohibits, and gives India an unfair competitive advantage.
The statement noted that China will take resolute measures to safeguard its “lawful rights and interests of domestic industries.” The statement also said that India’s trade and economic measures have been suspected of violating rules for some time now and have already aroused wide concern among WTO members.
Through this complaint, China could be looking to invoke WTO rules on the National Treatment Obligation, which bans discrimination against imported products, and the rule against Prohibited Import Substitution Subsidies, which specifically targets incentives contingent upon using domestic over foreign goods.
Furthermore, Beijing could also be looking to invoke the Subsidies and Countervailing Measures (SCM) Agreement, which challenges subsidies that are specific to certain enterprises or industries, cause adverse effects to other members' interests or distort trade and competition.
China's current dominance over the electric vehicle supply chain, particularly in several crucial technologies and components, has become a major global concern. This control extends to key materials such as heavy rare earth magnets, which are essential for high-performance EV motors, and critical stages of the manufacturing process, including advanced cell technology and lithium processing.
This concentrated control presents significant geopolitical and economic risks for nations seeking to accelerate their transition to electric mobility. Recently, Beijing has imposed severe export restrictions on heavy rare earth magnet exports from China.
In addition, last week they also imposed new export controls on critical parts of the lithium-ion battery supply chain, including high-performance lithium batteries, and cathode and graphite anode materials.
Countries worldwide are now aggressively pursuing strategies to diversify their supply chains and bolster domestic production capabilities. The goal is to mitigate risks associated with reliance on a single source and to establish resilient, localized ecosystems for the production of EVs and their components.
China has reached out to the WTO at a time the Indian government is working on a new scheme to provide subsidies to support domestic "end-to-end" magnet production - from rare earth oxide to magnets.