The growth strategies of electric vehicle manufacturers and the considerable potential of the automotive market might turn these tier 2 cities into major new hubs for EV demand.
Electric vehicle sales in India are surging, though they vary significantly among the nation’s 36 states and union territories, according to a recent BloombergNEF report. While tier 1 cities—richer, more populous, and developed—remain the epicentres of EV demand in India, tier 2 cities are rapidly catching up. This surge could position tier 2 cities as the forthcoming major centres for EV demand due to their large automotive markets and manufacturers’ strategic expansions. However, in smaller cities, where awareness and disposable income are lower, policy support will be critical for boosting EV sales.
BloombergNEF’s study of historical and current EV adoption trends, which included analysis of electric two-wheeler and car sales data from 207 cities across ten Indian states, aims to identify future growth drivers. Notably, Bengaluru leads tier 1 cities in EV adoption across passenger and two-wheeler segments, driven by factors like a young, income-stable demographic, an increase in dedicated EV cab services, and a wider selection of EV models.
Among tier 2 cities, state capitals typically spearhead electric car sales. For instance, in 2023, Jaipur, Rajasthan’s capital, represented over 79% of electric car sales across five analyzed cities in the state. Similarly, Lucknow and Thiruvananthapuram led their respective states in EV sales, with significant year-over-year growth.
Interestingly, most electric cars purchased in 2023 did not benefit from upfront price subsidies, and tier 2 cities generally lack a strong EV ride-hailing market, which underpins the EV surge in tier 1 cities. This underscores a shift towards private EV ownership.
Additionally, electric two-wheeler sales in some tier 2 cities have now outpaced those in larger metropolitan areas. For example, sales in Surat and Jaipur exceeded those in larger cities like Ahmedabad and Mumbai. This trend highlights the potential of tier 2 cities as key growth areas for electric two-wheelers, though tier 3 cities will require financial support to boost demand, given the slower price parity progression with gasoline vehicles.
