China’s recent decision to lodge a formal complaint against India at the World Trade Organization (WTO) over subsidies for electric vehicles (EVs) and batteries has reignited tensions between two of Asia’s largest economies. The move, announced on October 15, 2025, by China’s Commerce Ministry, alleges that India’s policies not only violate several WTO obligations, including the principle of national treatment, but also amount to prohibited import substitution subsidies. According to The Economic Times and PTI, China contends these measures unfairly benefit India’s domestic EV industry while undermining China’s commercial interests.
India’s Commerce Secretary Rajesh Agrawal responded to the development by stating that the ministry would closely examine China’s detailed submissions. "They have sought consultations with India," an official told The Economic Times, clarifying that this is a formal request to consult ahead of a full-blown dispute, not merely a trade concern to be discussed in committees. Under WTO rules, such consultations are the first step in the dispute settlement process; if the talks fail to yield a satisfactory solution, a panel can be established to rule on the matter.
This latest move comes at a delicate moment in Sino-Indian relations. The two countries have only recently begun to normalize ties after a five-year freeze triggered by the Eastern Ladakh military standoff. For China, India’s vast and rapidly growing auto market represents a significant opportunity to offset domestic challenges, including overcapacity, declining profits, and fierce price competition among Chinese EV makers like BYD. As reported by the China Passenger Car Association, approximately 50 Chinese EV manufacturers exported a combined 2.01 million pure electric and plug-in hybrid vehicles overseas in the first eight months of 2025—a staggering 51% increase from the same period last year.
However, Chinese automakers are encountering growing resistance abroad. The European Union recently imposed a 27% tariff on Chinese EVs in an effort to curb their sales within the bloc. Similar protectionist measures and trade disputes are emerging elsewhere, with China having filed comparable WTO consultations against Turkey, Canada, and the EU itself. These moves highlight the mounting global competition—and friction—surrounding the electric vehicle industry.
India, for its part, has been rolling out a series of policies aimed at boosting domestic EV production. Chief among these are the Electric Vehicle Policy and the Production-Linked Incentive (PLI) scheme, both designed to foster homegrown manufacturing and reduce reliance on imports. According to The Economic Times, New Delhi’s intent is clear: nurture a thriving domestic EV ecosystem that can compete on the world stage. Yet, China argues that these initiatives cross the line, amounting to "prohibited import substitution subsidies" that are explicitly forbidden under WTO rules.
In its statement, China’s Commerce Ministry was unequivocal: "India’s measures violate multiple WTO obligations, including the principle of national treatment, and amount to prohibited import substitution subsidies." The ministry further asserted that "these policies unfairly benefit India’s domestic EV industry and undermine China’s commercial interests," as reported by PTI and The Economic Times.
Trade data underscores the growing economic imbalance between the two nations. In the fiscal year 2024-25, India’s exports to China fell sharply by 14.5% to $14.25 billion, down from $16.66 billion in the previous year. Meanwhile, imports from China surged by 11.5% to $113.45 billion, up from $101.73 billion. The result is a record trade deficit of $99.2 billion—a gap that continues to widen, fueling anxieties within India’s business and political circles.
The stakes are high not only for the governments but also for the burgeoning EV sectors in both countries. For Chinese manufacturers, India represents a crucial overseas market at a time when domestic sales are being squeezed by price wars and an oversupply of vehicles. According to data from the China Passenger Car Association, the surge in exports is a direct response to declining profits and intense competition at home. With the EU market becoming less accessible due to tariffs, India’s vast consumer base has become even more attractive for Chinese EV giants.
Yet, India’s strategy has been to fortify its own EV industry through targeted incentives. The Electric Vehicle Policy and the PLI scheme offer financial support and other benefits to domestic manufacturers, aiming to create jobs, foster innovation, and reduce the country’s dependence on foreign imports. Supporters of these policies argue that such measures are necessary for India to catch up in the global EV race, especially when competing against established players like China.
Critics, however, caution that protectionist policies can backfire, potentially triggering retaliatory actions and trade disputes—as evidenced by China’s WTO complaint. The Indian government now faces the challenge of defending its policies on the international stage, balancing the need for industrial development with its obligations under multilateral trade agreements.
China’s complaint is not an isolated incident. The country has filed similar cases against Turkey, Canada, and the European Union, reflecting a broader strategy to counter what it perceives as unfair barriers to its EV exports. As an official told The Economic Times, "It will be a request to consult ahead of a dispute, not a trade concern in committees." This procedural step is significant: if consultations fail, the dispute could escalate to a full WTO panel, with potentially far-reaching consequences for global EV trade.
For now, both sides appear to be treading carefully. India’s Commerce Ministry has stated it will "examine China’s detailed submissions," signaling a willingness to engage—at least initially—in dialogue rather than confrontation. Still, the underlying tensions are hard to ignore. With trade deficits mounting and competition intensifying, the dispute over EV subsidies could become a flashpoint in the broader economic relationship between the two Asian powers.
As the world shifts toward cleaner transportation and green technologies, the outcome of this dispute will be closely watched by governments, automakers, and investors alike. The electric vehicle industry is not just about cars—it’s about jobs, technology, and the future of global trade. How India and China navigate this latest challenge may set the tone for years to come.
With both countries standing firm and the WTO process underway, the world’s attention is now on Geneva, where the fate of this high-stakes trade dispute will ultimately be decided.
