China controls 70% of global electric vehicle production—and has just filed a World Trade Organization complaint because India dared to build its own EV industry. Beijing’s October 20th, 2025 filing marks its first trade confrontation with India in nearly a decade, targeting India’s Production Linked Incentive schemes. These programmes—totalling over ₹44,000 crore—aim to accelerate domestic green mobility through the ₹18,100 crore Advanced Chemistry Cell Battery Storage scheme and ₹25,938 crore Automobile and Auto Components incentives. For China, facing an internal EV output glut and declining domestic demand, India’s rising competitiveness represents an existential threat to its export dominance.
Chinese manufacturers exported over 2.01 million electric and plug-in hybrid vehicles in the first eight months of 2025, up 51% year-on-year. However, the European Union recently imposed 27% tariffs on Chinese EVs, making India’s expanding market—Asia’s most desirable export destination—less accessible. India’s EV adoption surged to 2.6 million units in FY2024-25, representing a 46% year-on-year jump, whilst attracting Tesla, Hyundai, Ola Electric, Tata Motors, and Mahindra. The schemes attracted commitments exceeding ₹1.5 lakh crore in investments, projected to create one million jobs by 2030— a scale that genuinely threatens Chinese market dominance. Dr. Arvind Subramanian, former Chief Economic Adviser, captured the irony: “For decades, Beijing built industrial dominance through state subsidies—now it’s unsettled seeing India using the same tools effectively.”
China’s Legal Arguments and Strategic Motivations
China’s Ministry of Commerce alleges that India’s policies “unfairly favour domestic production and restrict imports” by conditioning subsidy eligibility on Indian-made component usage. Beijing argues such provisions violate key WTO agreements, including the Subsidies and Countervailing Measures Agreement and the General Agreement on Tariffs and Trade 1994. The Chinese filing specifically claims India’s EV programmes “constitute import substitution subsidies”—a form of state support explicitly prohibited under WTO rules. A ministry spokesperson stated: “India’s measures undermine fair competition and harm legitimate export interests of Chinese companies.” This legal framing positions China as defending free trade principles despite its own history of aggressive industrial subsidies building its current dominance.
The strategic motivation becomes clear when examining China’s current predicament—massive EV production capacity meeting declining domestic demand whilst facing growing protectionism in developed markets. According to the China Passenger Car Association, Chinese automakers face challenges finding export markets to absorb their excess production capacity after years of government-subsidized expansion. Economist Ila Patnaik observed: “China’s reaction underscores deeper geopolitical rivalry playing out through trade.” Adding to the irony, whilst China accuses India of protectionism, Beijing continues restricting rare earth exports critical for EV batteries even as it seeks open access to India’s EV market. This contradiction reveals that the complaint isn’t primarily about WTO compliance but about protecting Chinese manufacturers’ market access against rising Indian competition.
India’s Defence and Domestic Industrial Ambitions
India hasn’t issued an official written response yet but maintains its industrial policies fully comply with WTO standards whilst serving legitimate development objectives. Commerce Secretary Rajesh Agrawal stated: “We will review details and respond in accordance with WTO procedures—India’s incentive programmes are transparent and non-discriminatory.” Indian officials argue the PLI framework reduces import dependency, particularly on Chinese components, whilst strengthening domestic EV manufacturing and employment creation. A senior NITI Aayog official emphasized: “This is about self-reliance, not exclusion,” highlighting government ambitions to make India a global hub for energy storage systems by 2030. India’s defence will likely invoke WTO provisions allowing developing nations pursuing legitimate sustainable development goals through industrial policy supporting environmental objectives.
Trade law expert Raj Bhala from the University of Kansas noted: “India can argue that its EV subsidies are environmentally justified and aligned with global climate goals.” This defence strategy positions India’s programmes not as protectionism but as climate action supporting global decarbonization. India’s EV exports rose 36% last fiscal year, reflecting early success in global competitiveness beyond protected domestic markets. The sector attracted global players alongside local manufacturers, demonstrating that the schemes catalyze genuine industrial development rather than merely protecting inefficient domestic producers. The core question isn’t whether India’s PLI schemes are protectionist but whether they can be defended as legitimate tools for sustainable development—a principle recognized under WTO agreements for developing nations building green industries.
What the WTO Case Means for Global EV Competition
Under WTO procedures, the case now enters the consultation phase—the first step before formal dispute panels can be established if unresolved. If consultations fail, this could evolve into one of the most consequential trade battles between India and China since their 2020 border standoff disrupted relations. For India, the stakes extend beyond defending specific subsidy schemes—it’s about establishing the right of developing Beijing’s October 20th nations to build strategic industries through industrial policy. The sector already drew commitments exceeding ₹1.5 lakh crore in investments whilst projecting one million jobs by 2030—scale justifying a vigorous defence. For China, preserving export growth amid global scrutiny of its industrial policies remains equally critical, as domestic manufacturers struggle to absorb excess production capacity. The European Union’s 27% tariff on Chinese EVs signals growing resistance in developed markets to the downstream effects of Chinese industrial subsidies flooding markets with artificially cheap products.
As the WTO reviews the case, one thing emerges clearly: India’s clean-tech ambitions have finally arrived on the global radar—powerful enough to make Beijing nervous about losing market share. Whether this dispute evolves into a protracted economic confrontation or sets the stage for fairer green-industry competition will define not only Asian trade’s future but also the global EV race itself. India’s rapid progress from an import-dependent market to an emerging manufacturing hub in under five years demonstrates how effectively designed industrial policy can accelerate strategic sector development. China’s complaint paradoxically validates India’s approach by revealing how threatened Chinese manufacturers feel by genuine competition.
The outcome will establish important precedents about whether developing nations can use industrial policy supporting green transitions or whether WTO rules effectively lock in existing industrial dominance favoring early movers like China. For global climate goals requiring massive EV adoption, the case’s resolution matters profoundly—constraining India’s ability to build domestic capacity could slow global decarbonization by concentrating production in single-country monopolies vulnerable to geopolitical disruptions. The consultation phase offers opportunities for negotiated settlements, avoiding protracted litigation, though geopolitical tensions between India and China make compromise politically difficult for both governments facing domestic nationalist pressures.