A recent report by BloombergNEF (BNEF) reveals a new trend in the electric vehicle space in India: While major metros have taken the lead in EV
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Electric vehicles (EVs) are growing rapidly in India, but this growth is not evenly distributed. While major metros have been the initial driving force, a new trend is emerging: Tier 2 cities are set to become the next big battleground for EV adoption.
This shift is highlighted in a recent report by strategic research provider Bloomberg NEF (BNEF). Their analysis of electric two-wheeler and car sales across 207 cities in 10 Indian states has thrown up some startling findings.
Tier 2 cities are ahead of metros in electric two-wheeler sales
One key finding is that electric two-wheeler sales have surged in some Tier 2 markets. These cities have also outpaced their metropolitan counterparts in EV adoption for this segment. The report does not specify which specific models are leading the way, but it does suggest a growing preference for electric options among two-wheeler users in these smaller cities.
Interestingly, the picture is slightly different for electric cars in tier 2 cities. Here, state capitals seem to be leading the growth. This could be due to factors such as higher disposable income and better infrastructure compared to other tier 2 cities. Cities such as Jaipur, Lucknow, Thiruvananthapuram and Gurugram are witnessing a significant increase in electric car sales.
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Meanwhile, the report states that there are several reasons behind the adoption of EVs in wealthy Tier 1 cities. Young demographics with disposable income is the main reason. Apart from this, the growing presence of electric taxi services and the increasing availability of EV models are also fuelling the demand.
Tier 2 cities: Lack of ride-hailing infrastructure, but private sales steady
Tier 2 cities have not yet seen a robust electric ride-hailing market unlike their Tier 1 counterparts. This suggests that EV sales in these smaller cities are primarily driven by private ownership. Interestingly, the report also points out that most private electric cars purchased in 2023 were not supported by upfront price subsidies. This shows a growing organic demand for EVs independent of government incentives.
![There is a growing interest in electric options among two-wheeler users in these smaller towns. EV](https://zeennews.com/wp-content/uploads/2024/07/Electric-vehicles-are-going-local-Tier-2-and-Tier-3.jpeg)
Moreover, the good news is not limited to tier 2 cities. The report shows that the annual growth rate in high-speed electric two-wheeler sales is even higher in tier 2 and tier 3 cities compared to tier 1. This indicates a significant shift in consumer preference towards electric options across a wide range of Indian cities. In fact, cities like Surat, Jaipur, Nagpur, Kolhapur and Indore are witnessing a surge in electric two-wheeler adoption.
Financial support crucial for tier 3 cities
While tier 2 cities are likely to see continued growth in the electric two-wheeler market, tier 3 cities may need additional support to achieve the same level of adoption. The report suggests that demand-side policies, particularly financial subsidies, can play a key role in promoting EVs in these cities. This is especially important until EV prices reach a point where they directly compete with gasoline vehicles on upfront costs.
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Tier 2 cities are emerging as a key growth engine, especially for electric two-wheelers. However, continued success will depend on expanding EV sales and dealership networks in smaller cities to improve consumer awareness and access.
Additionally, addressing affordability through financial incentives or rapid price reductions will be critical for further growth, especially in tier 3 cities. As the EV ecosystem in India continues to grow, tier 2 and tier 3 cities are set to play a key role in shaping the sustainable mobility landscape in the country.
First Publication Date: 04 July 2024, 06:31 AM IST