India’s clean mobility revolution has collided with international trade law, triggering a diplomatic and economic confrontation that could reshape regional manufacturing dynamics for years. China has formally lodged objections at the World Trade Organisation against India‘s ambitious electric vehicle subsidy schemes, alleging discriminatory practices and trade violations. India’s Production Linked Incentive programmes and related policies promoting advanced chemistry cell batteries and electric passenger car production stand accused of violating established WTO trade norms.
Beijing contends these schemes favour domestic manufacturers like Tata Motors and Ola Electric, whilst systematically excluding Chinese competitors from accessing India’s rapidly expanding EV market. This dispute underscores the complex balance emerging economies face between nurturing nascent local industries and adhering to international trade rules amid intensifying global clean energy competition. The confrontation arrives at a particularly sensitive moment in India-China relations, occurring against the backdrop of ongoing border tensions, massive trade imbalances, and competing visions for Asian economic leadership. For India, the stakes extend beyond electric vehicles into broader questions of industrial policy sovereignty, technological self-reliance, and the right to protect emerging sectors from established foreign competitors with massive scale advantages and state backing.
China’s Complaint: Protectionism Disguised as Green Policy
China‘s complaint, officially lodged in October 2025, claims India‘s EV incentive schemes contravene multiple WTO agreements, notably the Subsidies and Countervailing Measures Agreement, the General Agreement on Tariffs and Trade 1994, and Trade-Related Investment Measures provisions. The core grievance centres on India’s policy conditioning subsidy eligibility on domestic manufacturing and local content requirements, effectively favouring Indian companies over foreign competitors, particularly those from China. Beijing argues these requirements create artificial advantages for domestic firms whilst excluding legitimate international competition that could deliver better products at lower prices to Indian consumers. Moreover, the imposition of steep import duties—ranging from 70% to 100% on fully built electric vehicles—is accused of creating significant market access barriers that severely limit Chinese manufacturers’ ability to compete in India’s burgeoning EV sector.
China contends that these measures collectively nullify or impair its benefits under WTO trade agreements, directly impacting trade flows in the automotive and renewable energy sectors where Chinese companies have invested billions developing manufacturing capacity and technological capabilities. The complaint suggests India is using environmental policy as cover for old-fashioned protectionism, shielding inefficient domestic producers from competition whilst claiming to pursue climate objectives that would theoretically be better served by allowing the most cost-effective solutions regardless of origin. Chinese officials argue that genuine commitment to rapid EV adoption would prioritise affordability and technology access over nationalist industrial policy that ultimately delays transition by maintaining higher prices for Indian consumers and businesses.
India’s Defence: Strategic Autonomy Meets WTO Compliance
Indian officials indicate readiness for consultations under the WTO dispute settlement mechanism as per procedural norms, aiming to resolve the matter amicably whilst vigorously defending national interests. Commerce Secretary Rajesh Agrawal affirmed that the ministry is reviewing China‘s detailed submissions and remains committed to abiding by international obligations whilst simultaneously protecting domestic industrial development priorities. Experts emphasise that India’s incentive frameworks, including PLI schemes totalling over ₹44,000 crore (approximately $6 billion), seek to promote green technology innovation within the country under its Atmanirbhar Bharat or “Self-Reliant India” mission launched to reduce dependence on imports.
The government highlights that incentives focused specifically on research, development, and green technology advancement fall under non-actionable subsidies as per WTO Article 8, potentially providing robust legal defence for India‘s position in the dispute proceedings. Furthermore, India benefits from significant timing advantages: the PLI scheme’s operational period spanning FY23 to FY27 and incentive payouts extending through FY28 coincide with the expected protracted WTO dispute duration, conservatively estimated at 4-5 years given procedural complexities. This timeline is extended further by the current paralysis of the WTO Appellate Body, which lacks sufficient members to hear appeals following US blocking of appointments, creating a procedural bottleneck that could limit enforcement and allow continued policy implementation amid ongoing negotiations and legal proceedings.
Geopolitical Undertones: Trade Imbalance and Strategic Competition
The dispute reflects deeper economic and geopolitical tensions characterising contemporary India-China relations beyond immediate trade policy disagreements or sectoral competition concerns. India’s trade deficit with China reached a staggering $99.2 billion in FY2024-25, underscoring persistent dependence on Chinese imports even in emerging sectors like electric vehicles and battery technologies where India seeks self-sufficiency. China’s WTO complaint is viewed by numerous analysts as an attempt to protect its dominant export position whilst India prioritises developing strategic manufacturing capabilities in clean technologies considered essential for both economic growth and national security considerations. Observers note that China has filed similar complaints against other countries’ subsidy regimes, reflecting a global trend of rising trade challenges as nations pursue domestic green industrial policies that inevitably create winners and losers in international competition.
This dispute coincides with recent diplomatic efforts to stabilise India-China relations following deadly 2020 Ladakh border clashes that killed dozens of soldiers and brought nuclear-armed neighbours dangerously close to wider conflict. The WTO complaint risks adding fresh friction to an already sensitive strategic relationship characterised by mutual suspicion, competing regional ambitions, and fundamentally different political systems and values that complicate cooperation even when economic interests align. The timing suggests China may be leveraging trade mechanisms to gain advantage in broader geopolitical competition for Asian leadership and influence over smaller neighbours increasingly forced to choose between competing powers.
Strategic Alternatives: Diversification and Alliance Building
India‘s engagement with frameworks like the Indo-Pacific Economic Framework and partnerships with Japan, the European Union, and the United States aim to diversify supply chains and reduce overreliance on China for critical EV components including batteries, motors, and advanced electronics. These alliances form part of a broader strategic response extending beyond the immediate WTO dispute, underlining India’s push for technological self-reliance and ecosystem building that reduces vulnerability to Chinese supply chain disruptions or political pressure. Collaboration with trusted partners offers alternatives to Chinese technology and investment whilst building coalitions that could support India’s position in international trade disputes and other multilateral forums where numbers and alliances matter significantly.
India is simultaneously working to develop domestic battery manufacturing capabilities, lithium processing facilities, and complete EV supply chains that would reduce dependence regardless of WTO dispute outcomes or Chinese market access. The government recognises that true strategic autonomy requires not merely tariff protection but genuine technological and manufacturing capabilities that can compete globally without permanent subsidisation or import barriers that ultimately harm consumers and limit innovation through reduced competition.
India‘s electric vehicle subsidy dispute with China at the WTO represents far more than technical disagreement over trade rules—it embodies fundamental tensions between industrial policy sovereignty and multilateral trade commitments, between protecting infant industries and promoting consumer welfare through competition, and between short-term strategic autonomy and long-term economic efficiency. India faces difficult choices about how aggressively to pursue domestic manufacturing goals that may violate trade commitments whilst China’s complaint reveals anxieties about losing market access in one of the world’s largest and fastest-growing economies.
The dispute’s resolution, likely years away given WTO procedural realities, will influence not only India’s EV sector but broader questions about emerging economies’ ability to use industrial policy for development whilst operating within global trade frameworks designed primarily by and for established industrial powers. Meanwhile, India will continue implementing its subsidy schemes, building domestic capacity, and diversifying partnerships, betting that by the time any final WTO ruling emerges, the country will have achieved sufficient manufacturing scale and technological capability to compete without subsidies that currently draw international objections but may prove essential for bootstrapping industries that eventually stand independently.