Tier II, III Cities: The New Hotspot For e-cars? Cities such as Jaipur, Lucknow, Thiruvananthapuram, Surat, Coimbatore are embracing electric cars

In calendar year(CY) 2024, the electric car segment continued to show steady progress. As much as 99,848 units were sold with a year-on-year (YoY) growth of 6.9 per cent, making up around 5 per cent of total electric vehicles (EV) sales in India the year. The EV market in India, particularly in Tier-II and Tier-III cities, is on the cusp of significant expansion. These regions offer unique opportunities that can be leveraged by understanding evolving consumer behaviours, market dynamics and shifting perceptions of EV ownership. India's large and midsize, second, third-tier cities are poised to grow, giving tough competetion to richer and more populous metrocities which are the present hubs of EV demand. Cities such as Jaipur, Lucknow, Thiruvananthapuram, Surat, Coimbatore, are not only embracing four-wheel EVs but also showing a strong preference for other electric vehicles.

"For MG Windsor, we are seeing sales coming from Tier II, Tier III and Tier IV cities. Almost 30 per cent of our EV sales are coming from these regions," said Parth Jindal, director, JSW MG Motor India Private Limited. The company plans to set up 520 touchpoints in 270 cities by the end of March 2025, with a focus on expanding its rural network.

Similarly, Tata Motors too sees a good prospect in the region. Shailesh Chandra, MD, Tata Motors Passenger Vehicles Limited, emphasized on the traction coming in after the announcement of Pradhan Mantri Surya Ghar Yojana. The scheme is about installing solar panels on roof tops. "There is definitely a very strong case now growing in rural areas. After the installation of solar panels, the running cost of an EV almost comes to nil. I believe there will be huge growth potential, especially in the lower tier towns," he added. Earlier, Vivek Srivatsa, chief commercial officer, Tata Passenger Electric Mobility (TPEM), had said EVs have been wholeheartedly embraced by the smaller towns to the extent that tier two and beyond contribute to 45 per cent of Tata Motors EV volumes.

For Kia India, smaller towns have always been a bigger bet. The company claims it has covered Tier II and III. "Tier IV in India is our next target. It's a long way to go, we have covered 300 cities and we still have 700 more cities to cover; we will catch up every year and next year we plan to do a lot," said Hardeep S. Brar, senior VP, & head of marketing & sales at Kia India.

"There is a lot of investment which is going into the market, all the roads which are coming up are through rural areas. The government has a lot of focus on these pockets and the rural economy is growing. For people in rural pockets, cars are an aspirational product. So, they're very particular about the product and we want to be closer to such customers," Brar added.

Government initiatives play a crucial role in promoting e-mobility. In recent years, various schemes and incentives have been introduced to encourage the adoption of electric vehicles, including subsidies, tax benefits, and incentives for setting up charging infrastructure. Leveraging these initiatives can significantly boost the uptake of e-mobility in rural areas. The middle class seeks aspirational products that reflect innovation, sustainability and status, EVs reflect all of these. Affordable, low-range EV models designed for local use can boost adoption, while flexible financing options can increase penetration.

These smaller pockets, with their readiness for innovation and focus on long-term value, are poised to become the cornerstone of India's EV transformation, paving the way for a sustainable and inclusive future in mobility. Despite the positive trends, these cities face challenges in EV adoption. High interest rates and limited financing options for EVs make it difficult for consumers to afford them. Traditional banks are often risk-averse, leading to higher interest rates for EV loans. Better financial support, government subsidies play a crucial role in making EVs more accessible. Furthermore, the lack of established infrastructure in these smaller cities impedes the market's growth potential.

Overall, Tata Motors maintained its dominance in the e-car segment with a market share of ~62 per cent in CY 2024, followed by MG Motor India at 22 per cent. Other significant players in the market include Mahindra & Mahindra (7 per cent), BYD (2.85 per cent), and PCA (2.19 per cent), according to JMK Research and Analytics.