Commercial vehicle segment growth slowing to 4-6% in FY27 as high base weighs on H2 volumes: ICRA

India’s commercial vehicle (CV) industry is expected to see growth moderate to 4-6% in wholesale volumes in FY2027, with a strong base from the second half of the previous fiscal likely to weigh on the sector’s performance later this year, according to ICRA.

The ratings agency expects medium and heavy commercial vehicle (M&HCV) trucks to register 1-3% YoY growth in FY27, while light commercial vehicle (LCV) trucks are projected to grow 6-8%. Bus volumes are expected to increase 3-5% during the fiscal.

GST-led base effect to weigh on H2

ICRA expects the broader base created during H2 FY2026, following the positive impact of GST rate cuts, to affect the industry’s growth momentum in the second half of FY27.

“The broadened base of H2 FY2026, due to the positive impact of GST rate cuts, is estimated to impact the growth momentum in H2 FY2027,” ICRA said.

The agency expects the high base to result in a year-on-year contraction in domestic CV wholesale volumes during H2 FY27, despite the industry recording strong growth during the opening months of the fiscal.

Demand drivers remain intact

Domestic CV wholesale volumes rose 23.4% YoY during the first five months of FY27. In August alone, volumes had grown 30.7% YoY and 6.8% sequentially, while domestic retail volumes increased 20.1% YoY.

The underlying demand environment has been supported by infrastructure execution, mining activity, e-commerce-linked logistics and steady financing availability. ICRA said the strong performance of the LCV segment has also reflected healthy last-mile transportation activity.

LCV retail volumes increased 21.3% YoY in August, although they declined 9.2% sequentially. GST rate cuts provided additional support to demand, along with improved last-mile freight movement and e-commerce activity. However, “Elevated cost of ownership (even after the GST rate cuts), however, remains one of the key challenges for this segment,” ICRA said.

M&HCV demand gets support from core sectors

M&HCV retail volumes grew 18.2% YoY in August, despite an 8.6% sequential decline. ICRA said demand picked up following the GST rate cut implemented from September 22, 2025, with rural demand, logistics activity and infrastructure-linked transportation requirements providing further support.

Demand was particularly aided by increased movement of cement, steel and mining-related cargo, the agency said.

The combination of these demand drivers and the impending high-base effect is expected to shape the CV industry’s trajectory through the remainder of FY27, with ICRA forecasting moderate full-year growth even as volumes face pressure in H2.