Standardizing Domestic Value Addition Audits: A Framework for OEMs in Emerging EV Markets

Abstract

Domestic Value Addition (DVA) has become a vital compliance parameter in India’s electric vehicle (EV) industry, particularly for Original Equipment Manufacturers (OEMs) seeking eligibility under government incentive programs such as FAME II and the Production Linked Incentive (PLI) scheme. This study proposes a standardized audit framework for verifying DVA claims in emerging EV markets by integrating financial auditing, techno-commercial assessment, and regulatory certification practices. The research is based on internship-driven field observations at the Automotive Research Association of India (ARAI) along with an extensive review of policy documents, audit guidelines, and industry literature. The study identifies major challenges affecting DVA compliance, including dependence on imported high-value components, inconsistencies in supplier documentation, data mismatches, and inadequate audit standardization across OEMs. Findings indicate that robust audit mechanisms involving GST invoice reconciliation, Bills of Entry verification, physical inspection of components, supplier declarations, and certification through Chartered Accountants or Statutory Auditors supported by UDIN authentication significantly improve transparency and reduce the risk of misreporting. The paper further recommends digitalization of audit records, ERP-enabled compliance systems, blockchain integration, supplier capability development, and adoption of uniform audit templates to strengthen verification processes. By aligning audit rigor with industrial policy objectives, the proposed framework supports sustainable EV localization, enhances regulatory compliance, improves industrial competitiveness, and contributes to India’s long-term clean mobility and manufacturing goals.