China has recently lodged a complaint with the World Trade Organization (WTO) regarding India's electric vehicle and battery subsidy measures. On October 20, the WTO announced that China had sent a letter to the Indian delegation on October 15, requesting consultations concerning measures related to automotive trade and renewable energy technologies, which has been distributed to all member countries.
In its letter, China highlighted that the measures in question from India include incentives aimed at promoting the production of advanced chemical batteries, automobiles, and auto parts. China argues that these measures depend on the use of domestic inputs rather than imports, resulting in discrimination against Chinese products, and contravene various provisions of the Agreement on Subsidies and Countervailing Measures, the Agreement on Trade-Related Investment Measures, and the General Agreement on Tariffs and Trade from 1994.
A spokesperson from China's Ministry of Commerce stated on October 15 that India’s measures have allegedly violated several obligations such as national treatment and constitute import substitution subsidies that the WTO expressly prohibits. These measures provide unfair competitive advantages to India's domestic industries, harming Chinese interests. China will take resolute actions to safeguard the legitimate rights and interests of its domestic industries.
**Allegations of Violating National Treatment and Other Obligations** In the document, China elaborated on India's relevant policies and measures. First, these include certain incentives linked to production that affect trade in the automotive and renewable energy technology sectors, such as the Production-Linked Incentive (PLI) Scheme for Advanced Chemical Cells (ACC). This program aims to encourage the establishment of gigawatt-scale ACC battery production facilities in India, focusing on maximizing domestic value addition.
ACC batteries represent a new generation of energy storage technologies that store electrical energy in the form of electrochemical or chemical energy and convert it back to electrical energy when needed. Such batteries are crucial for applications in electric vehicles and renewable energy storage systems.
According to the document, India aims to reduce reliance on imports through the PLI ACC scheme, promote domestic value addition, and support the development of high-performance, high-quality battery technologies within a specified timeframe.
Second, there is the PLI scheme for the automotive and auto parts industry, which promotes domestic production of Advanced Automotive Technology (AAT) products, including vehicles and components.
Third, the Electric Passenger Vehicle Manufacturing Promotion Scheme is designed to attract investments from global electric vehicle manufacturers and position India as a manufacturing destination for electric vehicles.
These three initiatives are intended to advance India's "Make in India" initiative first proposed in 2014, which aims to attract global investments and enhance Indian manufacturing, transforming the industrial landscape and positioning India as a global manufacturing hub. Under the aforementioned plans, the incentives provided by India are conditional upon meeting certain requirements, including Domestic Value Addition (DVA) requirements, which seem to tie the eligibility and amount of incentives to the use of domestically produced inputs.
For instance, the Electric Passenger Vehicle Scheme, launched in March 2024, aims to draw global electric vehicle industry investments by offering conditional tariff reductions for the import of completely assembled electric vehicles, aiding the establishment of electric vehicle production facilities in India. Specifically, it allows approved applicants to import vehicles at a 15% reduced tariff rate for up to five years from the date of approval, with the electric vehicle's minimum cost, insurance, and freight price needing to hit $35,000 to qualify. Each beneficiary is capped at an annual quota of 80,000 vehicles, with unused quotas allowed to carry over.
Approved applicants must set up a manufacturing facility in India within three years of approval. For vehicles manufactured in India, the scheme stipulates a DVA milestone of at least 25% by the third year and 50% by the fifth year. DVA is defined as the share of manufacturing activities conducted domestically, calculated by subtracting the total value of all imported parts and materials from the product's ex-factory price.
**Request for Immediate Correction of Erroneous Practices** China has stated that it reserves the right to propose the establishment of a panel during the consultation process and in future requests under Article 6.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, to present supplementary facts, measures, and claims relevant to the dispute, including those under other applicable agreements.
China also expressed anticipation of India's response and aims to agree on a mutually convenient consultation date. The request for consultations typically signals a formal dispute within the WTO. These consultations provide both parties an opportunity to discuss the issues and find a satisfactory resolution without further litigation. If the dispute remains unresolved after 60 days, the complainant may request the establishment of a panel to adjudicate the matter.
The expert group procedure includes five stages: establishment of the group, working procedures, rights to gather information, review of interim reports, and adoption of the final report. Previously, a spokesperson from the Ministry of Commerce noted that China has observed multiple Indian trade and economic measures that allegedly violate WTO rules, raising widespread concern among member countries. "We urge the Indian side to adhere to its commitments under the WTO and immediately correct its erroneous practices," the spokesperson stated.