Infrastructure and Tax: Speed Bumps on the Road to EV Adoption While metro cities like Delhi, Mumbai, and Bangalore have long been the face of India's mobility shift, it's the Tier 2 and Tier 3 towns that are turning heads now

India's electric vehicle (EV) market was valued at USD 8.03 billion in 2023 and is expected to grow to USD 117.78 billion by 2032, with a compound annual growth rate (CAGR) of 22.4 per cent, according to Fortune Business Insights.

One of the main reasons behind this growth is the country's struggle with air pollution. As reported by the World Resources Institute, some of the Indian cities are among the most polluted in the world—causing millions of deaths each year and transportation is a major contributor, with road transport alone responsible for over 13 per cent of the country's energy-related greenhouse gas emissions.

To tackle this, India has set targets to achieve net-zero emissions by 2070 and aims for 30 per cent of all vehicle sales to be electric by 2030. As of now, EVs make up just 6 per cent of the total vehicles on Indian roads, but even this small share has helped avoid about 10 million tonnes of carbon emissions between 2020 and 2024.

Adoption in Tier 2 and Tier 3

While metro cities like Delhi, Mumbai, and Bangalore have long been the face of India's mobility shift, it's the Tier 2 and Tier 3 towns that are turning heads now.

"I think the journey of adoption for EVs in Tier 2, Tier 3 towns has ended up being actually a huge boon," said Sanjay Byalal Co-Founder, Exponent Energy. "Despite the fact that the price point of an electric vehicle is 20-30 per cent more than a conventional IC engine vehicle, the moment they made it available in these towns and positioned it as an aspirational vehicle, sales have been huge."

These smaller towns offer a surprising advantage—home charging. With shorter distances and more personal space, residents don't depend on public charging stations like in big cities. "A city like Bangalore or Delhi, if you do more than 60 kilometers, you have to have a public charging system. But in smaller towns, you can always rely on home charging," Sanjay explained.

Startups Paving the Way

EV adoption may have started slow, but startups have turbocharged the shift. Rahul Yadav CTO, Zypp Electric shared how their journey took off. "When we started in 2017, EV adoption was slow, but now it is growing. Our company itself has a fleet of 25,000 two-wheelers and 1,000 three-wheeler loaders. We manage 25 hubs across India—in Bangalore, Gurgaon, Delhi, Noida, Hyderabad, and Mumbai."

Technology plays a crucial role. "Each part of our EV is tested by AI-driven solutions so we can reduce our ETA for RFD of a vehicle and allot it to a rider in minimum possible time," Rahul added. Their operations now deliver 2 million orders a month, with about 1,000 vehicle allotments daily.

According to a Tracxn report, India witnessed the emergence of over 486 electric vehicle (EV) startups in 2023. By 2024, this number had surged, with more than 700 registered EV companies operating across the country. These companies—ranging from large-scale manufacturers to smaller ventures—span the entire EV spectrum, including two-wheelers (2Ws), three-wheelers (3Ws), and four-wheelers (4Ws) catering to both passenger and commercial transport segments.

The Missing Links in the EV Chain

Despite the progress, barriers remain—chief among them, charging infrastructure and taxation.

"As many people contribute to the ecosystem of EV, bigger players will come in, then there will be a better ecosystem," Yadav said. "There will be a situation where there will be no need for petrol-driven vehicles to deliver orders or even for transportation services like Rapido or Porter."

However, Byalal raised a critical point about policy gaps. "You don't pay tax on fuel, but you have to pay 18 per cent GST on public EV charging. In a city like Ahmedabad, it's actually cheaper to run a CNG vehicle than an EV because of high electricity taxes. We're still running on an archaic GST law from 2014."

Building for Bharat, Not Just India

The future of India's EV landscape won't be shaped by imported Teslas, but by locally built solutions designed for Indian roads and wallets.

"A Tesla in the US costs USD 40,000. After duties, it becomes over 40 lakh rupees here," Sanjay pointed out. "Very few people in India can afford that. A Maruti Suzuki Swift sells for 6 lakh. If you want electric mobility to happen in India, you need to build for India—not bring in a product from outside."

It's a view shared by many in the industry. EVs must be built with affordability, range, and durability in mind—features that suit Indian terrains, cities, and economic conditions.

Government Angle

To accelerate adoption, the government is stepping in. The PM E-Drive initiative, with a budget of INR 3,679 crore, aims to subsidise electric two- and three-wheelers, reducing upfront costs for consumers. The EV charging infrastructure is also expected to balloon to USD 3.7 billion by 2030, according to EVfy.

"Future is obviously electric," Rahul emphasised. "You can see the developed markets like Taiwan and China—they are all electric. India will also follow suit when we have swappable service stations and charging stations available across geographies."

As Sanjay aptly summed up, "The future is solutions which are tailored for the kind of economic climate that India is in. A product that works there is what makes sense."