India’s domestic EV market to be defined by Tier-2 cities

India’s Tier-2 cities could soon become the defining domestic market for electric vehicles, or EVs, a report by the research provider BloombergNEF (BNEF) says.

The report is based on a BNEF survey conducted across 207 towns and cities in Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, and Uttar Pradesh, besides Delhi.

TIER-1 CITIES CURRENTLY LEAD

The more populated and moneyed Tier-1 cities drive EV demand in India right now, the report says, adding that India’s EV growth in the metros is primarily dominated by youth with disposable income, a growing range of EV models to buy from and an increase in pure-play EV cab operators.

Among Tier-1 cities, Karnataka’s capital city tops the list when it comes to EV use, in terms of two-wheelers as well as passenger vehicles.

TIER-2, TIER-3 NARROWING GAP

However, the difference in sales between the metros and mid-sized cities is consistently narrowing, according to the report. While annual growth rate of electric two-wheeler sales in certain Tier-2 and Tier-3 markets have actually crossed the metropolitan cities, mid-sized cities that are state capitals show a substantial increase in sales of electric cars. EV sale in 70 Tier-2 cities recorded for 2023 saw an overall surge of 51 per cent, while the increase was 30 per cent in 131 Tier-3 cities that were surveyed.

In Rajasthan, over 79 per cent sales of electric cars, across the state’s five Tier-2 cities, were recorded in the capital city of Jaipur. Over 2,400 electric cars were sold in the city in 2023, compared to less than 1,000 in the previous year.

In Haryana, Gurugram recorded the sale of around 1,570 electric cars in 2023.

In Uttar Pradesh, the capital city of Lucknow was the state’s biggest market with 1,120 EVs sold.

In Kerala, the capital city Thiruvananthapuram topped electric car sales in the state with 840 units.

Cities that recorded impressive sales figures for electric two-wheelers in 2023 were Surat (20,150 vehicles) and Jaipur (18,600). The numbers are more than Tier-1 cities such as Ahmedabad (17,300), Mumbai (13,800) and Chennai (13,710), the reports notes. Smaller cities such as Kolhapur (9,320 vehicles) and Indore (9,200) have caught up, too.

RIGHT EXPANSION STRATEGY THE KEY

The report suggests Tier-2 cities could sustain growth of India’s EV market with the right expansion strategies, adding that it was important to tap people with disposable income in smaller cities, who may have inadequate knowledge of the technology.

In most cases, purchasing an electric car was not supported by subsidies and only two states provided any form of subsidy as of 2023. The report notes that despite subsidy limits drying up by mid-2023, sales were steady. Right now, the priority for EV makers is also to foray the smaller cities of India with sales and dealership facilities.