The Great EV Funding Reset: What Comes After FAME-II?

For nearly a decade, India’s electric mobility story has been powered by government incentives.
FAME-I kickstarted adoption; FAME-II accelerated it with demand subsidies for two- and three-wheelers, buses, and fleet vehicles.

Now, as the program phases out, the EV sector stands at an inflection point.
The EV funding reset is underway where easy money, aggressive pricing, and subsidy-backed scale give way to hard economics, operational efficiency, and market-driven growth.

The good news? The transition could make India’s EV ecosystem more self-reliant and sustainable than ever before.

The FAME-II Era: Fuel for Early Growth

Launched in 2019, FAME-II injected ₹10,000 crore to push India’s EV adoption.
It subsidized up to 40% of two-wheeler costs, built confidence in battery technology, and helped early movers like Ola Electric, Ather Energy, and Hero MotoCorp Electric scale quickly.

The results were dramatic:

• Two-wheeler EV registrations jumped from 1.5% in FY2020 to over 10% in FY2025.

• Battery supply chains expanded across India.

• Venture capital poured into manufacturing and charging startups.

But subsidy-led growth also masked deeper challenges: negative unit economics, overdependence on imported battery cells, and unrealistic valuations across the EV startup ecosystem.

The Post-FAME Reality Check

As subsidies wind down, EV players face a profitability stress test.
Without government cushioning, many business models especially in the low-cost e-scooter segment are no longer viable.

The implications are structural:

• Price corrections: Average EV prices have risen 10–15%.

• Capital caution: VC funding fell nearly 40% YoY in 2024.

• Margin compression: OEMs now rely on efficiency, not incentives, to stay competitive.

The end of FAME-II marks the start of natural selection in the EV industry.
The survivors will be those that can localize, optimize, and innovate sustainably.

Why Funding Is Shifting From Growth to Governance

The investor lens has changed.
In the “subsidy decade,” funds chased market share.
Now they underwrite financial discipline measuring EV startups on metrics like gross margin, retention, working capital cycles, and contribution per unit.

Investors are asking tougher questions:

• What’s your break-even horizon without subsidies?

• How stable is your battery supply chain?

• How strong is your residual value and service income?

The future of automotive investment lies in disciplined capital, not momentum capital.

The Rise of Strategic and Climate Capital

Even as venture funding cools, strategic investments from OEMs, energy companies, and climate funds are rising.
Legacy automakers like Tata Motors and Mahindra Electric are co-investing in startups that plug supply-chain gaps from cell manufacturing to charging infrastructure.

Simultaneously, global climate finance and ESG funds are redirecting green capital toward scalable EV businesses that can demonstrate carbon impact and circular value.

The next stage of funding won’t chase hype; it will back ecosystem value creation.

Battery Localization: The New Investor Magnet

The battery industry is emerging as the new frontier of EV investment.
With India targeting 50 GWh of cell manufacturing capacity by 2030, capital is moving upstream into:

• Cell and module manufacturing

• Battery recycling startups

• Second-life and BESS (Battery Energy Storage System) solutions

Localized production cuts cost volatility and builds investor confidence.
In the next funding cycle, the best-performing EV startups will be those that own or partner in battery ecosystems.

Charging, Financing, and Software: The Next Growth Wave

As product margins narrow, investors are betting on adjacent profit pools:

• Charging infrastructure with subscription revenue

• EV financing and leasing models that expand affordability

• Automotive software development for connected mobility and predictive analytics

These layers create recurring revenue the holy grail of post-FAME business models.
The next unicorns won’t build vehicles; they’ll build value loops around them.

The Shift Toward Capital Efficiency

Startups once designed for speed now need to optimize for capital efficiency getting more output from every rupee raised.
That means:

• Localized manufacturing to cut forex exposure

• Predictive supply chains using AI-based demand models

• Integrated CRM–DMS systems to reduce leakage across dealers and aftersales

OEMs are also turning to venture architects and operational partners to implement these efficiencies.
This is where data architecture meets strategic execution the core of sustainable EV growth.

The Road Ahead: FAME-III and the Era of Self-Reliance

India’s policymakers are already planning the next phase a possible FAME-III or an expanded National Electric Mobility Mission.
But rather than blanket subsidies, the focus will likely shift to:

• R&D and manufacturing incentives

• Battery recycling mandates

• Public charging networks

• Fleet electrification and export-oriented manufacturing

This policy evolution signals a move from dependency to competitiveness.
EV players who adapt early will lead the decade’s next “Make in India” mobility wave.

The GrowthJockey View: Funding Efficiency Is the New Differentiator

At GrowthJockey, we believe the post-FAME phase isn’t a slowdown it’s a system reset.
The Indian EV industry is maturing from startup exuberance to enterprise discipline.

OEMs and startups that integrate data-led decision-making, customer retention loops, and sustainable financing models will dominate the future of automotive mobility.

Through Intellsys.ai, we help enterprises model funding-to-profitability paths and identify operational leaks.
With Ottopilot, we enable ecosystem learning that scales teams as efficiently as capital.

GrowthJockey is a venture architect for enterprises helping OEMs, EV startups, and ecosystem enablers scale with discipline.
From unit economics modeling to ecosystem design, we engineer profitability for the next generation of electric mobility.

FAQs

Q1. What is FAME-II, and why is it ending?
Ans. FAME-II is India’s second-phase EV subsidy program launched in 2019. It is phasing out as the government transitions toward self-sustaining market growth.

Q2. How is the funding landscape changing for EV startups?
Ans. Venture capital is declining, while strategic investments and climate funds focused on sustainability are rising.

Q3. What sectors will drive the next wave of EV funding?
Ans. Battery manufacturing, recycling, software, and charging infrastructure will attract the most capital.

Q4. Will FAME-III happen?
Ans. Likely but with a shift toward R&D, battery localization, and export-led competitiveness rather than consumer subsidies.