CV sales growth may slow to 4-6% in FY27 as high base, financing delays weigh on demand: ICRA

India's domestic commercial vehicle (CV) industry is expected to record a moderate 4-6% growth in wholesale volumes in FY27, as a higher base and delays in vehicle financing temper the pace of expansion despite healthy freight movement and replacement demand.

The outlook, which was outlined in a research report by ICRA, indicates that the industry's growth trajectory remains intact but is likely to normalise after the stronger momentum witnessed in FY26. The forecast suggests the industry is entering a phase of normalisation after two years of robust recovery, with replacement demand and freight activity emerging as the key drivers of volume growth.

The rating agency expects light commercial vehicles (LCVs) to continue driving growth, while medium and heavy commercial vehicles (MHCVs) are likely to post modest gains. ICRA said continued infrastructure spending, improving freight movement and replacement demand are expected to support wholesale volumes in FY27, although higher fuel costs and financing challenges remain key headwinds.

LCVs to remain the growth engine

LCV wholesale volumes are projected to grow 6-8% in FY27, making them the fastest-growing segment within the domestic CV market.

ICRA said the segment continues to benefit from improved last-mile freight movement, stronger rural demand and GST rate rationalisation. However, longer turnaround times for vehicle financing remain a key challenge and could delay purchases despite healthy underlying demand. The segment had reported a 12.4% year-on-year increase in retail volumes in FY26, highlighting the strong base from which growth is expected to moderate this year.

ICRA also noted that commercial vehicle retail sales in rural markets outpaced urban centres in May 2026, indicating that demand for goods movement is gradually broadening beyond metro regions.

Truck demand to remain steady

Wholesale volumes of MHCVs are expected to rise 1-3% in FY27.

Demand is likely to be supported by infrastructure-led freight movement and replacement demand, including school buses. However, the higher comparison base and rising fuel prices are expected to cap growth during the year. The MHCV segment had recorded a 10.1% year-on-year increase in retail volumes in FY26. However, fuel price hikes during May 2026 weighed on demand despite continued support from infrastructure-led freight movement and replacement demand.

Bus segment to outperform trucks

The bus segment is projected to grow 7-9% in FY27, outpacing the truck segment.

Replacement demand and improving mobility trends are expected to support volume growth, although buses continue to account for a smaller share of the overall commercial vehicle market.

Recent industry trends also point to healthy underlying demand. Domestic CV wholesale volumes rose 13.5% year-on-year in May 2026 and increased 15% during the first two months of FY27. Retail volumes, meanwhile, grew 5.3% year-on-year in May, although they declined 18.3% sequentially, reflecting a moderation from the previous month.

Growth to moderate after FY26

Overall, the domestic CV industry is expected to remain on a growth path in FY27, supported by freight movement, replacement demand and infrastructure activity. According to ICRA, financing conditions and the higher base of the previous year will be the key factors determining the pace of wholesale volume growth.

The rating agency said the broadened base of FY26 is likely to have a bearing on growth momentum in the current fiscal, even as the underlying demand environment remains favourable. As replacement demand gathers pace and infrastructure spending continues, the industry's growth trajectory is expected to become more stable rather than return to the sharp expansion witnessed over the past two years.