India’s electric vehicle (EV) market has come a long way in the last decade. Electric vehicles accounted for only 0.08% of vehicle registrations in 2015. By 2023-24, that share had increased to 6.82%, reflecting the rapid expansion of electric mobility in the country.

Government support has been an important part of this transition. The Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme was introduced to make EVs more affordable, encourage domestic manufacturing and develop the charging infrastructure needed for wider adoption.

However, a recent audit by the Comptroller and Auditor General of India (CAG) has highlighted several gaps in the implementation of the FAME scheme.

The findings cover everything from subsidy verification and domestic manufacturing requirements to charging infrastructure and data management. For investors tracking India’s EV sector, the report offers an important reminder: industry growth and policy execution are two different things.

What Is the FAME Scheme?

The Faster Adoption and Manufacturing of Electric Vehicles in India, or FAME India scheme, was launched in 2015 as part of the government’s efforts to accelerate electric mobility.

The scheme was designed around more than simply giving consumers a discount on electric vehicles. It aimed to create an entire EV ecosystem by supporting demand, domestic manufacturing, technology development and charging infrastructure.

FAME I operated from 2015-16 to 2018-19. It was followed by FAME II in 2019, which had an allocation of ₹11,500 crore and continued until 2024.

Under FAME II, incentives were provided for eligible electric two-wheelers, three-wheelers, four-wheelers and buses. The programme also supported charging stations and research and development related to electric mobility.

The objective was straightforward: make EVs more affordable today while helping India build the manufacturing and infrastructure ecosystem required for long-term adoption.

But the CAG audit suggests that several parts of the system did not work as intended.

FAME II Got the EV Demand Mix Wrong

One of the first issues identified by the audit was the allocation of funds across different vehicle categories.

Of the approximately ₹8,600 crore earmarked for vehicle incentives under FAME II, around ₹2,000 crore was initially allocated to electric two-wheelers, ₹2,500 crore to three-wheelers, around ₹550 crore to four-wheelers and approximately ₹3,550 crore to electric buses.

Consumer demand, however, developed differently.

Electric two-wheelers gained much stronger traction than expected. By March 2023, the category had already utilised about 127% of its original allocation.

Three-wheelers, meanwhile, had used only around 16% of their allocation, while four-wheelers had utilised approximately 28%.

The government subsequently reallocated funds in May 2023. The allocation for electric two-wheelers was increased by 75%, while allocations for three-wheelers and four-wheelers were reduced by 72% and 54%, respectively.

The change reflected actual market demand, but it also highlighted a weakness in the original projections.

For investors, this is an important point when evaluating policy-driven sectors. Government incentives can accelerate adoption, but consumer behaviour ultimately determines where demand develops.

Were EV Subsidies Being Paid to Eligible Vehicles?

The more significant concern involved the verification of subsidy eligibility.

FAME II was also designed to promote domestic EV manufacturing. Under the Phased Manufacturing Programme (PMP), manufacturers were expected to progressively increase the use of locally manufactured components.

Components such as onboard chargers, hub motors and motor controllers were subject to localisation requirements.

However, the CAG found that the system did not have an adequate mechanism to continuously verify whether vehicles receiving incentives were complying with these requirements.

Manufacturers obtained certification for sample vehicles and declared that the vehicles sold under the scheme would comply with the prescribed rules. But regular checks of vehicles actually sold were limited.

The problem surfaced after complaints led to further inspections.

Testing agencies examined manufacturing records, inspected facilities and physically checked vehicle components. According to the CAG, five manufacturers had received around ₹468 crore in incentives despite violating localisation requirements.

Two manufacturers subsequently returned approximately ₹190 crore, including interest, while around ₹278 crore remained outstanding.

The larger lesson is clear: a subsidy framework is only as strong as its verification mechanism.

The ₹1.5 Lakh EV Subsidy Loophole

Another issue involved the price ceiling for electric two-wheelers.

Under FAME II, electric two-wheelers with an ex-factory price above ₹1.5 lakh were not eligible for incentives.

The audit found that some manufacturers sold mandatory onboard chargers separately from the vehicle. By excluding the charger from the listed vehicle price, the manufacturers could keep the official price below the ₹1.5 lakh eligibility threshold.

The charger, however, was not truly optional because it was required to operate the vehicle.

According to the CAG, around ₹1,420 crore in incentives was paid on vehicles using this pricing approach.

The Ministry subsequently asked manufacturers to refund customers for the separately sold chargers. However, the CAG pointed out that refunds did not resolve the fundamental eligibility question.

Had the charger been included in the vehicle price from the beginning, some models could have exceeded the FAME II price limit and potentially become ineligible for subsidies.

For investors, this highlights another important factor when analysing companies benefiting from government schemes: understanding the rules can be just as important as understanding the market opportunity.

FAME Portal Had Data and Verification Issues

A government subsidy programme distributing thousands of crores also needs a reliable system for tracking claims.

According to the CAG, this was another weak point.

During its review of FAME I, the audit compared information from the scheme’s online portal, its underlying database and physical records maintained by the Ministry.

The numbers did not consistently match.

Different parts of the system showed different figures for subsidy claims, while the lack of complete vehicle-level information made independent verification difficult.

FAME II introduced a new portal, but the audit found problems there as well.

The system reportedly accepted invoice dates that fell outside the scheme’s operational period, including dates decades into the future. It also accepted duplicate vehicle registration numbers and processed some duplicate claims.

For a period, the FAME portal was not directly integrated with Vahan, the government’s vehicle registration database. Officials therefore had to manually compare data, including Excel files, to verify subsidy claims.

This raises a broader question about government spending in technology-led sectors.

If the system cannot reliably track the money, how effectively can policymakers measure the outcome?

EV Charging Infrastructure Was Another Weak Link

EV adoption depends on more than vehicle subsidies.

Consumers also need convenient and reliable charging infrastructure.

Under FAME II, the government approved 2,877 public charging stations under its city-charging programme. According to the CAG, only 148 were established and made operational.

Another programme involving 1,576 charging stations along highways and expressways was cancelled after limited progress.

A separate plan allocated 8,412 charging stations to three state-owned oil marketing companies. Yet none had been commissioned by the March 2024 deadline.

The CAG also inspected 104 charging stations across five cities and two highway stretches.

Several problems were identified, including stations without power, damaged equipment, missing installations and software issues. In some locations, staff were reportedly unfamiliar with operating the chargers.

This is an important distinction for the EV industry:

A charging station installed is not necessarily a charging station available.

For the consumer, the infrastructure only has value if it is powered, accessible, compatible and operational.

The CHAdeMO Mistake

One example illustrates the importance of forecasting technology adoption correctly.

The government had required certain charging projects to include CHAdeMO chargers, a fast-charging standard associated primarily with Japanese EVs.

The expectation was that Japanese manufacturers would introduce compatible vehicles in India. That adoption did not happen at the expected scale.

By the time the requirement was changed, agencies had already ordered and installed some of these chargers.

The CAG found that around ₹10 crore was spent on CHAdeMO chargers that could not be effectively used because compatible EVs were not available on Indian roads.

It is a relatively small amount compared with the overall FAME budget, but it represents a much larger policy lesson: infrastructure decisions need to be aligned with realistic technology and consumer adoption forecasts.

What FAME Means for EV Investors

The FAME scheme has undoubtedly played a role in India’s transition towards electric mobility. EV registrations have increased substantially, manufacturers have expanded their electric portfolios and the ecosystem has matured.

For investors, however, the CAG findings provide a useful framework for looking beyond the headline EV growth story.

A company operating in a rapidly expanding industry does not automatically become a strong investment opportunity.

Investors evaluating EV stocks in India should look beyond sales growth and sector-wide adoption. Factors such as revenue quality, profitability, cash flows, debt, capital expenditure, competitive positioning and dependence on government incentives can be equally important.

You can explore our guide to EV Stocks in India to understand the broader investment landscape around India’s electric mobility sector.

The same principle applies when evaluating any policy-driven industry.

Government incentives can create demand, but they can also change. Eligibility criteria can be revised, subsidies can be reduced and policy priorities can shift.

Therefore, investors should assess whether a company’s business model remains viable without relying entirely on policy support.

FAME vs PM E-DRIVE: What Has Changed?

The FAME framework has now been replaced by PM E-DRIVE, the government’s newer electric mobility support programme.

Some of the weaknesses identified during the FAME period have led to stronger verification measures.

The government has moved towards mechanisms such as Aadhaar-authenticated e-vouchers and annual checks of vehicle components to verify localisation requirements. The subsidy verification process has also been strengthened through greater integration with vehicle registration data.

These changes are intended to make the system more transparent and reduce the possibility of duplicate or ineligible claims.

The transition from FAME to PM E-DRIVE therefore represents more than a change in the name of the scheme. It reflects an attempt to make India’s EV subsidy framework more targeted, technology-enabled and accountable.

The Bigger Picture

The CAG audit does not mean that India’s EV transition has been unsuccessful.

Far from it.

The rise in EV adoption demonstrates that consumer interest exists and that the industry has made significant progress.

But the audit highlights something equally important: policy success cannot be measured only by how much money was allocated or how many vehicles were subsidised.

A successful EV policy must also ensure that subsidies reach eligible vehicles, domestic manufacturing requirements are actually followed, charging stations become operational and public money can be tracked accurately.

For investors, the takeaway is equally relevant.

A growing sector can create opportunities, but growth numbers need to be examined alongside the quality of that growth.

As India moves from FAME to PM E-DRIVE and into the next phase of electric mobility, the focus will increasingly shift from simply increasing EV adoption to building a sustainable ecosystem around it.

And that is where the next phase of India’s EV story could become particularly interesting — not just how many electric vehicles India sells, but how strong the businesses and infrastructure supporting them actually become.