New Delhi, March 10
The domestic commercial vehicle (CV) industry’s wholesale volumes is set to witness a year-on-year growth of 3-5 per cent in FY26, demonstrating some recovery, a report showed on Monday.

This follows a flat volume movement estimated in FY2025, marred by the demand slowdown in the first half of the fiscal due to the Lok Sabha elections, according to an ICRA report.

Commenting on the outlook for the industry, Kinjal Shah, senior vice president at ICRA, said: “Resumption of construction and infrastructure activities, steady rural demand along with higher replacement sales stemming out of ageing fleets and Government mandates are the likely driving factors to propel this 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 infrastructure capital outlay in the recent budgetary allocation, a steady increase in mining activities and the improvement in roads/highway connectivity are expected to support volumes going forward.

The replacement demand would also remain healthy, primarily due to the ageing fleet, estimated at around 10 years for the medium & heavy commercial vehicles (M&HCVs) and is expected to aid the industry volume expansion in the medium term, according to the report.

Among the various sub-segments, the M&HCV (trucks) wholesale volumes are likely to grow by up to 3 per cent YoY in FY2026 after seeing a flattish growth or marginal contraction in FY2025.

Resumption of construction and infrastructure activities is likely to aid the low YoY volume increase in FY2026. The segment reported an 7 per cent YoY contraction in the April-December period of FY2025, with the tipper volumes contracting by 11 per cent YoY, and the haulage and tractor-trailer sub-segments each declining by 5 per cent YoY.

Wholesale volumes for the domestic light commercial vehicles (LCV) (trucks) are expected to see a modest 3-5 per cent YoY expansion in FY2026, after registering a flattish growth or marginal contraction in FY2025.

Resumption of infrastructure and construction activities, coupled with an improving economic environment are likely to remain the key drivers for the segment’s growth in FY2026. The segment witnessed a decline of 3 per cent on a YoY basis in the nine months of FY25, on account of factors such as a high base effect, sustained slowdown in e-commerce and cannibalisation from electric three-wheelers (e3Ws).

The scrapping of older government vehicles has been driving replacement demand for the bus segment from the state road transport undertakings (SRTUs). The same is expected to result in an 8-10 per cent YoY growth for the segment in FY2026, after an anticipated 11-14 per cent YoY expansion in FY2025, thereby surpassing the historic high volumes of FY2013, in FY2025.

In terms of powertrain mix, conventional fuels (primarily diesel) continue to dominate the domestic CV industry with a penetration of 88 per cent in YTD FY2025, while alternative fuels (CNG, LNG and electric) accounted for the balance. Relatively higher penetration of electric vehicles (EVs) has been witnessed in the buses segment, with a penetration of 5 per cent in YTD FY2025, the report stated.

Formation of the dedicated freight corridors (DFCs) will add incremental capacity to the railways network -- while ICRA anticipates the DFCs to largely impact container traffic on Western corridor, other road traffic is expected to remain relatively unimpacted.

Increasing freight rates are likely to support the industry's demand prospects. While delinquencies for both new and used CV portfolios have moderated from their respective peaks from the pandemic period and have remained steady over the last four quarters, the movement in the same remains a key monitorable, the report added.

India’s commercial vehicle sales to speed up in FY2025-26: Report