China has filed a formal complaint with the World Trade Organization (WTO) against India, challenging the subsidies that India offers for electric vehicles (EVs) and batteries. China's Ministry of Commerce is urging India to rectify what it views as "wrongdoings". The ministry asserts that India's measures create an unfair competitive advantage for domestic industries and harm China's economic interests. China is requesting that India review and adjust these policies to ensure fair competition and compliance with WTO rules.
India has been aggressively promoting the adoption and domestic manufacturing of EVs through various subsidy schemes, tax incentives, and local production support. These initiatives aim to establish India as a regional hub for clean mobility and reduce reliance on imports, particularly from China. China, however, views these policies as a potential threat to its dominance in the global EV battery market.
The specific subsidies under scrutiny likely include those provided under schemes like the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme and production-linked incentive (PLI) schemes. FAME provides subsidies for the purchase of electric two-wheelers, three-wheelers, four-wheelers, and buses, while PLI schemes incentivize domestic manufacturing of EV components, including batteries. The Indian government has also increased the battery energy storage target of its viability gap funding (VGF) program to 13.2 GWh, providing financial support for up to 40% of battery energy storage system (BESS) project capital costs. Moreover, the government launched the PM E-DRIVE scheme to support the EV ecosystem in India.
China's complaint could lead to formal dispute resolution proceedings at the WTO, potentially requiring India to make policy adjustments. Trade analysts suggest this action highlights the increasing friction in clean energy trade between India and China, especially in sectors critical to the global transition to sustainable mobility.
The backdrop to this dispute is the rising trade tensions between the two nations, even as India seeks to decrease its reliance on Chinese imports for batteries and promote domestic manufacturing. India's efforts to incentivize local battery cell manufacturing are seen as crucial for its energy transition. The complaint also comes as the Central Electricity Authority (CEA) in India has proposed incentives like tax breaks and subsidies to boost domestic manufacturing of battery energy storage components.
The Chinese Commerce Ministry has warned it may adopt "firm measures" to protect the legitimate rights and interests of its domestic industries if India does not take corrective action. The complaint underscores the delicate balance India must strike between promoting its domestic EV industry and maintaining fair trade practices in accordance with WTO rules.
