Challenges and opportunities in scaling electric vehicles in Tier-II and Tier-III cities

While this sector is still emerging, it holds tremendous potential to revolutionize urban mobility across the country. Tier-II and Tier-III cities, with their rapidly increasing populations and rising traffic congestion, represent an especially promising landscape for the widespread adoption of EVs. However, scaling this transformative technology in these cities brings both challenges and opportunities that require careful navigation.

Existing Challenges

One of the most significant barriers to EV adoption in smaller cities is the lack of a robust charging infrastructure. Unlike metropolitan areas, Tier-II and Tier-III cities often have a limited number of charging stations, making it challenging for EV owners to find convenient and reliable charging points. Several other challenges also need to be addressed:

1. Limited Awareness: Awareness about electric vehicles is generally lower in Tier-II and Tier-III cities compared to metros. Misconceptions around EV performance, range anxiety, and maintenance costs can hinder broader acceptance. Educational initiatives and local campaigns are essential to dispel myths and increase understanding of the benefits of EVs.

2. Affordability: Although electric vehicles offer significant savings on fuel over time, the initial purchase price can be a barrier, especially in smaller cities where disposable incomes may be lower. Government subsidies, such as those provided under the FAME-II scheme, along with incentives from manufacturers, are crucial in bridging this affordability gap and making EVs more accessible to a broader population.

3. Product Availability: The range of EV models available in these regions is often more limited than in metropolitan areas. This restricted choice can slow adoption, as consumers may not find vehicles that meet their specific needs. Expanding the product range in these markets is vital for catering to diverse consumer preferences.

4. Dealership and Service Network: The presence of authorized dealerships and service centres is often sparse in Tier-II and Tier-III cities. This limited availability can make potential buyers hesitant, as they may be concerned about access to after-sales service and support. Strengthening the dealership network and ensuring adequate service infrastructure are key to building consumer confidence.

5. E-Rickshaw Regulations: The rapid growth in e-rickshaw usage in these cities underscores the need for clearer regulations and enforcement mechanisms. Challenges such as inadequate driver training, unregulated charging practices, and the lack of designated parking spaces must be addressed to ensure these vehicles integrate safely and sustainably into the urban transport network.

Shifting Trends: From Limited Use to Broader Acceptance

Historically, the demand for electric vehicles in these regions was driven by vehicles with lead-acid batteries, often leased for commercial purposes like rickshaw services. This model limited ownership pride and kept the user base predominantly male.

Today, there is a noticeable shift towards lithium-ion batteries, including swappable options, offering greater flexibility and ease of use. Improved financing options are enabling sole ownership, transforming EVs from mere livelihood tools into vehicles of personal pride. The user base is diversifying, with increasing adoption by women and usage extending to various commercial applications, such as delivery services, catering, and street vending.

Additionally, there is a growing trend towards more advanced L5 vehicles, which offer greater utility and can serve both personal and commercial needs. This shift reflects a deeper sense of pride in ownership, with EVs now seen as valuable career assets rather than just temporary tools for earning a living.

Opportunities for E-Mobility Growth in Tier-II and Tier-III Cities

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.

1. For Businesses:

Cost Efficiency: The cost savings associated with electric vehicles, especially in terms of fuel, are particularly compelling in smaller cities, where fuel costs can be a substantial burden. Coupled with government subsidies under the FAME-II initiative and state-level incentives, EVs present an attractive investment for businesses looking to reduce operating costs.

2. For Consumers:

Enhanced Perception and Livelihood: As perceptions of EV ownership evolve, consumers in Tier-II and Tier-III cities are beginning to view these vehicles as assets that offer pride and long-term value. The rising demand for L5 vehicles, known for their enhanced utility and comfort, underscores this changing mindset.

3. For Products:

Growing Demand for L5 Models: The demand for L5 electric vehicles is rapidly increasing in these cities. These models are valued for their versatility and the sense of ownership pride they instil in consumers. As more buyers seek vehicles that can be customized to meet their specific needs, the demand for L5 models is expected to continue its upward trajectory.

4. For Use Cases:

Expanding Commercial Applications: The versatility of electric vehicles is leading to their adoption across a broader range of industries. Beyond traditional roles like rickshaw services, EVs are now being used in delivery, catering, and even by street vendors. This expansion of use cases is driving demand and fostering the development of a more diverse and resilient market.

The expansion of e-mobility in Tier-II and Tier-III cities represents a significant opportunity for sustainable growth in the EV industry. By recognizing and addressing the challenges specific to these regions and adapting to emerging trends, we can unlock the full potential of e-mobility, driving economic development while contributing to broader environmental goals. As we continue to innovate and expand our presence in these markets, [Company Name] remains committed to leading the charge in India's electric vehicle revolution. 

Nitin Kapoor is the MD of SAERA Electric Auto. Views expressed are his own.