WTO Receives China’s Challenge To India’s Make In India Incentives For EV And Battery Manufacturing

The World Trade Organization (WTO) has received a request for consultations from China regarding several incentive measures adopted by India in the automotive and renewable energy technology sectors. The request, dated October 15, 2025, initiates a trade dispute in which China contends that India’s measures unfairly favor domestic products over imports, particularly affecting Chinese-origin goods. The dispute centers on India’s “Make in India” initiative, which is implemented through three programs that require companies to meet high levels of Domestic Value Addition (DVA) to qualify for financial incentives.

The three programs under scrutiny are the Production Linked Incentive (PLI) scheme for Advanced Chemistry Cell (ACC) Battery Storage, the PLI scheme for the Automobile and Auto Component Industry, and the Scheme to Promote Manufacturing of Electric Passenger Cars in India. These programs are designed to encourage local manufacturing, attract global investment, and reduce India’s reliance on imported goods.

The PLI ACC Scheme targets giga-scale manufacturing of ACC batteries. Firms participating in this scheme must meet phased DVA targets to receive subsidies. They are required to achieve at least 25 percent DVA within two years, rising to 60 percent within five years. The subsidy itself is calculated by multiplying the subsidy rate by the percentage of DVA achieved and the volume of cells sold. This structure links the financial benefit directly to the use of local materials and inputs.

Similarly, the PLI Auto Scheme supports manufacturers of Advanced Automotive Technology products. Only sales of pre-approved products that meet at least 50 percent DVA are eligible for sales-linked incentives. DVA is calculated by subtracting the value of imported components and materials from the product’s ex-factory price. This ensures that the incentives favor domestically sourced parts, strengthening the focus on local manufacturing.

The EV Passenger Cars Scheme is aimed at attracting global electric vehicle manufacturers. Under this program, approved applicants can access reduced customs duties on imported fully assembled electric passenger cars. However, they must commit to setting up manufacturing facilities in India and meeting DVA milestones of 25 percent by the third year and 50 percent by the fifth year for vehicles manufactured domestically. Compliance with both the minimum investment requirement and the 50 percent DVA benchmark is secured by a significant bank guarantee, which can be enforced if the targets are not met.

China claims that these DVA requirements constitute subsidies that are contingent upon the use of domestic over imported goods. According to China, this directly violates Articles 3.1(b) and 3.2 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement). China also argues that these measures violate the General Agreement on Tariffs and Trade 1994 (GATT 1994) by giving less favorable treatment to imported goods and are inconsistent with the Agreement on Trade-Related Investment Measures (TRIMS Agreement).

The dispute underscores growing tensions between countries over national industrial policies that rely on local content requirements to promote self-sufficiency. India’s measures are part of a broader strategy to strengthen critical sectors such as electric vehicles and renewable energy storage, aiming to foster domestic manufacturing and reduce import dependency. The WTO consultations will now examine the claims, providing a platform for both China and India to present their positions and seek a resolution under international trade rules. This case highlights the challenges nations face in balancing industrial growth policies with global trade commitments, particularly in high-growth technology sectors where domestic incentives can impact foreign competitors.