FAME-II EV Crackdown 2025: How India’s EV Subsidy Reset Shook the Two-Wheeler Market
Introduction: A Shockwave Across the EV Sector
The Indian electric vehicle (EV) revolution hit an unexpected bump in 2025. The government’s sudden and strict crackdown on non-compliance with the FAME-II subsidy scheme sent shockwaves through the two-wheeler industry. Overnight, sales plummeted, startups collapsed, and the once-crowded EV market began to shrink. The move, although controversial, was aimed at cleaning up the system and restoring transparency in the government’s flagship EV support policy.
The FAME-II EV crackdown 2025 wasn’t just about punishing violators—it triggered a complete restructuring of the market and laid the groundwork for a more sustainable future.
What Is FAME-II and Why Was It Introduced?
FAME, which stands for Faster Adoption and Manufacturing of Electric Vehicles, is a government incentive program launched to support the EV industry by offering subsidies. FAME-II, launched in April 2019, was the second phase of this initiative, offering around ₹10,000 crore in subsidies, mainly to electric two-wheelers, three-wheelers, and buses.
To ensure these incentives went to truly Indian-made vehicles, the policy demanded localization—meaning EV components had to be sourced or manufactured within India. This was meant to boost domestic manufacturing and reduce reliance on Chinese imports.
Why the Crackdown Happened in 2025
By late 2024, reports started emerging of manufacturers misusing the scheme. Some companies were claiming subsidies while failing to meet the localization norms. Others had discrepancies in vendor invoices or submitted inflated costs to avail higher benefits.
After an investigation, the Ministry of Heavy Industries uncovered significant irregularities. Several smaller EV players were found to be non-compliant, and the government acted swiftly—halting subsidies, demanding refunds, and initiating legal action where necessary.
This government action in 2025 came to be known as the FAME-II EV crackdown, and it sent shockwaves through the industry.
Which Brands Were Hit the Hardest
Startups and small companies bore the brunt of the crackdown. Brands like Hero Electric, Okinawa Autotech, Benling India, and Ampere Electric saw their sales drop dramatically.
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Hero Electric, once India’s largest electric two-wheeler maker, fell from nearly 30,000 units in 2023 to under 500 units in 2025.
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Okinawa saw an even steeper drop, selling over 31,000 units in 2023 but less than 2,000 in early 2025.
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Benling India and AMO Mobility nearly vanished from the market, with sales dropping to just two digits.
Many of these brands had built their pricing strategies around subsidies. When the benefits were revoked, their vehicles became too expensive for their target consumers, and demand evaporated.
Winners of the Crackdown
While smaller players suffered, compliant companies benefited from the vacuum created in the market.
Brands like TVS Motor, Bajaj Auto, Ola Electric, and Ather Energy continued to grow. They had invested in local supply chains and were fully compliant with FAME-II rules. As the number of players shrank, their market shares expanded.
Ola Electric, in particular, saw a surge in bookings, having maintained consistent pricing and strong service networks.
Consumer Reaction: Shock, Confusion, and Hesitation
The crackdown created uncertainty among buyers. Many customers who had booked EVs under the assumption of government subsidies now faced higher prices. Some canceled orders, while others switched to petrol scooters.
With subsidy eligibility removed for several brands, a sudden price increase of ₹10,000 to ₹25,000 made budget EVs unaffordable for a large section of buyers. This directly impacted the sales momentum the sector had built over the previous few years.
Government’s Next Steps: FAME-III Incoming
As the dust settles, the government is already working on the next phase—FAME-III. The new policy is expected to have:
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Tighter auditing processes
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Clearer subsidy disbursal mechanisms
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Stronger penalties for non-compliance
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Focus on long-term EV ecosystem development
Officials have hinted that FAME-III will aim to reduce misuse while continuing to support clean transportation. However, subsidy amounts may be lower, and companies will have to meet even stricter standards.
Impact on the EV Ecosystem
The FAME-II EV crackdown 2025 was more than a one-time correction—it marked a transition point in India’s EV journey.
Positive impacts:
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Only compliant, serious players remain in the market
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Transparency has improved
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Long-term investors now see reduced policy risk
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Consumer confidence in top-tier brands is rising
Negative impacts:
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Small innovators were wiped out
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Overall EV sales dipped temporarily
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Public trust in newer brands declined
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The affordability of electric vehicles took a hit
Long-Term Outlook
Despite the chaos, the long-term outlook for India’s EV market remains positive. The shake-up was painful, but necessary. The market is expected to recover gradually, led by strong brands and government-backed infrastructure development.
Over the next 2–3 years:
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Charging infrastructure will improve
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Battery prices are expected to fall
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Local manufacturing will strengthen
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FAME-III could bring more stable incentives
India’s EV dream isn’t over—it’s just entering a more mature phase.
FAQs: FAME-II EV Crackdown 2025
Q1. What is the FAME-II EV crackdown 2025?
It refers to the government’s strict action against electric vehicle manufacturers who misused FAME-II subsidies by violating localization and compliance rules.
Q2. Why were some EV brands affected more than others?
Smaller brands that relied heavily on subsidies and didn’t follow the rules saw their sales collapse. Larger, compliant brands continued to grow.
Q3. What happened to Hero Electric and Okinawa?
Both brands were among the hardest hit. Hero Electric went into insolvency, and Okinawa’s sales dropped by over 90%.
Q4. Will the government continue subsidies in the future?
Yes, through FAME-III, but the structure will change. The focus will be on stronger compliance and supporting only genuine players.
Q5. Should consumers still consider buying EVs in 2025?
Yes, but from established, compliant brands. The market is stabilizing, and support for EVs continues from both government and private players.
Conclusion: A Necessary Disruption
The FAME-II EV crackdown 2025 was disruptive, but also necessary. It sent a clear message—government support will come with accountability. The policy reset exposed the fragility of subsidy-driven growth while opening the door for a more resilient, transparent industry.
As India prepares for FAME-III and a cleaner transportation future, this moment will be remembered as the turning point that cleaned up the EV ecosystem—and laid the foundation for real, sustainable progress.
Source: Economic Times
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