China has filed a formal complaint at the World Trade Organization (WTO) against India, alleging that New Delhi’s subsidies for electric vehicles (EVs) and batteries provide an unfair competitive advantage to domestic industries.

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¨     The Chinese Ministry of Commerce announced that it has lodged a complaint with the WTO claiming that India’s EV and battery subsidies violate multilateral trade rules.

¨     The ministry stated that these measures undermine China’s legitimate interests and give an unfair competitive edge to India’s domestic manufacturers.

¨     China has requested consultations with India, which is the first step in the WTO’s dispute settlement process.

¨     India now has 30 days to engage in consultations with China to resolve the issue before a dispute panel may be requested.

¨     The complaint comes at a time when India is preparing to launch the National Critical Mineral Stockpile (NCMS) programme to secure access to rare earth elements crucial for EV battery production and green technologies.

¨     The Indian Ministry of Commerce has stated that it will review China’s submissions in detail before issuing a formal response.

¨     China has also filed similar trade complaints against Turkey, Canada, and the European Union over EV-related incentives.

India’s EV Subsidy Framework

¨     The FAME India Scheme (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles), launched in 2015, provides direct purchase incentives to promote adoption of electric two-, three-, and four-wheelers and the creation of charging infrastructure.

¨Under FAME Phase-I (2015–2019), over 2.55 lakh EVs were supported along with development of key charging infrastructure to encourage early adoption.

¨     The Government of India provides several incentives under the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME-II) scheme to promote electric mobility.

¨     Subsidies include ₹15,000 per kWh for two-wheelers (up to 40% of the vehicle cost), ₹10,000 per kWh for three- and four-wheelers, and ₹20,000 per kWh for e-buses.

¨     The National Electric Mobility Mission Plan (NEMMP) 2020 aims to accelerate EV production and adoption through fiscal incentives and policy support for manufacturers and consumers.

¨     India introduced the Scheme for Manufacturing of Electric Cars (SMEC) in 2024, which allows concessional import duties for companies establishing new EV manufacturing plants in India.

¨     These initiatives aim to promote domestic production, reduce import dependency, and support India’s clean energy transition.

Global and Trade Context

¨     China currently accounts for nearly two-thirds of global EV sales but faces challenges such as declining domestic profits and growing trade restrictions abroad.

¨     The European Union recently imposed a 27% tariff on Chinese EV imports to curb their dominance in the European market.

¨     China’s WTO complaint against India is seen as an effort to safeguard its EV export interests and prevent the spread of similar protectionist measures in emerging markets.

¨     India’s growing EV and battery production capacity, combined with mineral security initiatives like the NCMS, could reduce its dependence on Chinese imports in the long term.

World Trade Organisation (WTO)

¨     It was formed under the Marrakesh Agreement signed on 15th April 1994 by 123 countries after the Uruguay Round negotiations (1986-94) of the General Agreement on Tariffs and Trade (GATT), leading to the formation of the WTO in 1995.

¨     The WTO is the only global international organisation dealing with the rules of trade between nations.

¨     At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments.

¨     The goal is to ensure that trade flows as smoothly, predictably and freely as possible.