India’s commercial vehicle industry set for a comeback in FY26, ICRA projects steady growth

India’s commercial vehicle industry’s wholesale volumes are expected to rise by 3-5% YoY in FY2026, according to ICRA’s latest report released today.

The report stated that after experiencing a sluggish FY2025, the medium and heavy commercial vehicle (M&HCV) truck segment is poised for marginal growth, with wholesale volumes expected to rise by 0-3% YoY in FY2026. This segment struggled in the first nine months of FY2025, witnessing a 7% YoY contraction, driven by an 11% drop in tipper volumes, while the haulage and tractor-trailer sub-segments each saw a 5% decline.

India’s domestic light commercial vehicle (LCV) truck segment is gearing up for a modest recovery, with wholesale volumes projected to grow by 3-5% YoY, following a flat or slightly negative performance in FY2025. This revival is expected to be driven by a rebound in construction and infrastructure projects, alongside an improving economic landscape. The segment saw a 3% YoY decline, weighed down by a high base effect, a prolonged slowdown in e-commerce, and growing competition from electric three-wheelers (e3Ws).

The bus segment is benefiting from a strong replacement wave, supported by the government’s vehicle scrappage policy, which has been driving demand from state road transport undertakings (SRTUs). As a result, the segment is projected to grow by 8-10% YoY in FY2026, following an anticipated 11-14% expansion in FY2025. With this surge, the segment is set to surpass its historic peak from FY2013, the report noted.

Outlining the key drivers of volume expansion, Kinjal Shah, Senior Vice President & Co-Group Head, ICRA, said, “The resumption of construction and infrastructure activities, steady rural demand, and higher replacement sales due to ageing fleets and government mandates are expected to drive volume expansion towards the end of FY2025 and through FY2026. ICRA expects the long-term growth drivers for the domestic CV industry to remain intact. The sustained push in infrastructure development—evidenced by the higher capital outlay in the recent budget—along with increasing mining activities and improvements in road and highway connectivity, are expected to support volumes going forward. Replacement demand will also remain strong, primarily due to an ageing fleet, estimated at around 10 years for medium and heavy commercial vehicles (M&HCVs), which is expected to aid industry volume expansion in the medium term.”

From October 2025, air-conditioned truck cabins will become mandatory in India, pushing up vehicle prices by ₹20,000-30,000. With rising compliance costs and ongoing modernisation efforts, capital expenditure (capex) and industry investments are expected to climb to ₹58-60 billion (₹5,800-6,000 crore) in FY2025 and FY2026, compared to ₹34 billion (₹3,400 crore) in FY2024, the report added.

“ICRA expects the operating profit margin (OPM) of domestic CV original equipment manufacturers (OEMs) to remain range-bound at 11-12% in FY2025 and FY2026, compared to 10.7% in FY2024. Factors such as favourable raw material costs, price hikes undertaken by CV OEMs, and other cost rationalisation measures are expected to provide some support to profitability,” Shah added.