Electric vehicle (EV) adoption in India has primarily been centered in major metropolitan areas such as Delhi, Mumbai, Bangalore, and Hyderabad. However, a shift is underway, with Mahindra & Mahindra recognizing that the next phase of EV growth will be driven by Tier-2 cities.
Tier-2 Cities as the New EV Hubs
According to recent reports, Nalini Kanta Gollagunta, CEO of Mahindra’s automotive sector, has indicated that cities like Bhubaneswar, Indore, Jaipur, and Meerut are emerging as key markets for EV demand. Smaller cities offer the advantage of readily available dedicated parking, simplifying the installation of home charging setups. Additionally, the increasing prevalence of short-distance commuting and advancements in highway infrastructure are accelerating the adoption of EVs. Many customers in these regions are within the price bracket of 20 lakh rupees and above, making the transition to electric vehicles a feasible option without significant obstacles.
Mahindra’s Three-Pronged EV Strategy
This shift aligns with Mahindra’s EV strategy. The company secured a 41% revenue market share in the EV segment during Q1, which is supported by its three-tiered product approach.
Pack 3: Premium segment (e.g., BE 6 and XEV 9e), which were launched to strengthen the company’s EV brand presence.
Pack 2: Mid-range EVs, expanding the customer base, resulting in sales growth from 3,500 to 4,000 units per month.
Pack 1: Entry-level EVs, specifically designed for first-time EV buyers.
Focus on Premiumization
Mahindra is concentrating on positioning EVs as premium products, rather than focusing solely on affordability. Pack 3 models have successfully presented EVs as desirable to customers. Now, Pack 2 delivers affordability while maintaining a premium feel, especially for Tier-2 cities where EV adoption is gaining momentum. Pack 1 is expected to attract a wider customer base in the future.
This strategy is also apparent in its SUV lineup. The Scorpio acts as a volume driver, while the XUV700 and Thar have resonated with younger buyers. The 3XO reached 1 lakh unit sales within a year of its launch, reflecting the balance between premium and mass-market appeal.
Potential Challenges
While the opportunities are substantial, there are still challenges. The reduction in GST on large ICE SUVs could potentially narrow the price difference between EVs and ICE vehicles. However, Mahindra believes that taking into account features and tax benefits, EVs are already competitively priced with ICE vehicles in 60% of the market.