China has moved a step further in its trade dispute with India by asking the World Trade Organisation’s (WTO) dispute settlement body to set up a panel against New Delhi’s incentive schemes for automobiles, batteries and electric vehicles (EVs), after bilateral consultations failed to break the deadlock.

The request follows a complaint filed by Beijing in October last year, in which it alleged that certain conditions under India’s Production Linked Incentive (PLI) schemes for advanced chemistry cell (ACC) batteries, automobiles and policies to promote EV manufacturing violate global trade rules by discriminating against Chinese goods.

In a communication to the WTO, China said consultations were held on November 25, 2025, and January 6, 2026, with the aim of reaching a mutually agreed solution. “Unfortunately, those consultations failed to resolve the dispute,” it said.

“China therefore requests the Dispute Settlement Body to establish a panel to examine this matter,” the communication dated January 16 said.

China has also sought that the request be placed on the agenda of the next meeting of the Dispute Settlement Body, scheduled for January 27 in Geneva.

Under WTO rules, seeking consultations is the first step in the dispute settlement process. If consultations do not lead to a satisfactory outcome, the complainant can ask for a panel to be formed to rule on the matter.

In its complaint, Beijing has argued that India’s measures are contingent on the use of domestic over imported goods and discriminate against products of Chinese origin.

According to China, these measures appear to be inconsistent with India’s obligations under the Agreement on Subsidies and Countervailing Measures (SCM), the General Agreement on Tariffs and Trade (GATT) 1994, and the Trade-Related Investment Measures (TRIMs) Agreement.

China has flagged three programmes in particular: the Production Linked Incentive scheme, the National Programme on Advanced Chemistry Cell (ACC) Battery Storage, the Production Linked Incentive Scheme for Automobile and Auto Component Industry, and the Scheme to Promote Manufacturing of Electric Passenger Cars in India.

Both India and China are members of the WTO. Under the organisation’s rules, if a member country believes that a policy or support measure of another member is harming its exports, it can initiate a dispute through the settlement mechanism.

The case comes at a time when trade ties between the two countries remain strained. China is India’s second-largest trading partner, but the imbalance continues to widen.

In the last fiscal year, India’s exports to China fell 14.5 per cent to USD 14.25 billion, compared with USD 16.66 billion in 2023–24. Imports from China rose 11.52 per cent to USD 113.45 billion in 2024–25, up from USD 101.73 billion the previous year.

As a result, India’s trade deficit with China widened to USD 99.2 billion during 2024–25. China’s challenge to India’s EV-related incentives also comes as Beijing looks to expand overseas sales of its electric vehicles.

With India’s large auto market, Chinese EV manufacturers see the country as an important destination.

Recent reports suggest that Chinese automakers are facing overcapacity, with high production levels and pressure on domestic sales and profits due to price wars.

Companies such as BYD have been exploring overseas markets, particularly in Europe and Asia.

Data from the China Passenger Car Association (CPCA) shows that around 50 Chinese EV manufacturers exported a combined 2.01 million pure electric and plug-in hybrid vehicles in the first eight months of the year, a 51 per cent increase from the same period last year.

However, Chinese EV exports have met resistance in several markets. The European Union, for instance, has imposed a 27 per cent tariff on Chinese electric vehicles to curb their sales in the bloc.

India, meanwhile, has been pushing a mix of policy measures to encourage domestic manufacturing in the EV sector.

In May 2021, the government approved the PLI ACC scheme under the National Programme on Advanced Chemistry Cell Battery Storage, with an outlay of Rs 18,100 crore to support 50 GWh of capacity for five years, following a gestation period of two years.

The aim is to reduce import dependence and bring down the cost of cell manufacturing in India. In September 2021, the Centre cleared a PLI scheme for the automobile and auto components sector with a budgetary outlay of Rs 25,938 crore.

The scheme seeks to address cost disadvantages in manufacturing and encourage fresh investment in advanced automotive technology products, while also generating employment.

More recently, in March 2024, the government approved a policy to promote India as a manufacturing base for electric vehicles with newer technologies.

The scheme is aimed at attracting investment from global EV manufacturers and encouraging them to set up production facilities in the country.