WTO Establishes Panel in China-India Dispute Over EV and Battery PLI Schemes: What It Means for the Indian EV Industry

The World Trade Organization (WTO) has officially escalated the trade friction between India and China by establishing a dispute settlement panel to investigate India’s Production Linked Incentive (PLI) schemes. This move comes after China filed a formal complaint targeting India’s efforts to localize the manufacturing of electric vehicles (EVs) and high tech components.

For stakeholders in the Indian EV ecosystem from OEMs to battery startups this legal battle marks a critical juncture in the "Make in India" journey.

The Core of the Dispute: Local Value Addition

China’s grievance, first filed in October 2025, specifically targets three major Indian initiatives:

1. PLI for Automobiles and Auto Components: Incentives designed to boost domestic EV production.

2. PLI for Advanced Chemistry Cell (ACC) Batteries: The backbone of India’s push for battery self reliance.

3. Policy to Promote Manufacturing of Electric Vehicles: Broad frameworks that encourage global OEMs to set up shop in India.

Beijing alleges that these schemes violate the Subsidies and Countervailing Measures (SCM) Agreement by making incentives contingent upon "domestic value addition." China argues that these requirements unfairly discriminate against Chinese made components and imported goods.

The Timeline of Escalation

The establishment of the panel on February 24, 2026, follows a series of failed diplomatic efforts:

• November 2025 – January 2026: Bilateral consultations failed to yield a resolution.

• January 27, 2026: India exercised its right to block China’s first request for a panel.

• February 24, 2026: Under WTO rules, a second request cannot be blocked, leading to the formal commencement of the dispute panel.

Global Backing: The US Supports India

In a notable development, the United States has joined the fray as a third party, throwing its weight behind India. U.S. representatives criticized China’s move, suggesting that Beijing should focus on its own "non market policies" rather than challenging India’s transparent industrial incentives. Other major economies, including the EU, UK, Japan, and Canada, have also reserved their rights to participate in the proceedings.

Impact on the Indian EV Industry

For the Indian EV sector, the PLI schemes have been a "game changer." They have attracted massive investments from players like Ola Electric, Reliance, and Mahindra.

• Manufacturing Sentiment: While the WTO process can take years, the uncertainty could lead to cautiousness among international investors regarding the long term structure of Indian subsidies.

• Supply Chain Localization: If the WTO eventually finds the "domestic content" requirements inconsistent with trade rules, India may have to restructure how it grants incentives, potentially slowing down the rapid localization of battery supply chains.

• Trade Deficit Concerns: With India’s trade deficit with China hovering near $99.2 billion, the government remains committed to reducing reliance on Chinese imports, particularly in the critical EV component sector.