India’s Commercial Vehicle Sector Poised for 3-5% Growth in FY26, Driven by Infrastructure and Fleet Renewal: ICRA

India’s commercial vehicle (CV) industry is gearing up for a 3-5% growth in FY26, according to a fresh analysis by ICRA. While the sector witnessed a relatively flat trajectory in FY25, influenced by election-related uncertainties and a tepid demand phase, the coming fiscal year looks more promising. The revival will be driven by infrastructure expansion, fleet modernization, and steady rural demand—though challenges remain.

Key Drivers of Growth

Several factors will fuel this upward movement:

Infrastructure Boom – The government’s relentless push for infrastructure development, alongside increased budget allocations, is expected to significantly boost demand for commercial vehicles. More roads, bridges, and urban projects mean more trucks, buses, and tippers hitting the roads.

Rural Momentum – Demand from rural sectors remains steady, ensuring a stable requirement for goods carriers and logistics vehicles. Agriculture and allied sectors are key contributors.

Fleet Replacement – The commercial fleet in India is aging. Many medium and heavy commercial vehicles (M&HCVs) are over a decade old. With stricter emission norms and fuel efficiency mandates in place, replacement demand is set to rise.

Segment-Wise Projections

M&HCVs: Growth in this segment is expected to be subdued, hovering between 0-3% in FY26. The first nine months of FY25 saw a 7% contraction, especially in haulage trucks, tippers, and tractor-trailers. Economic activity will dictate the pace of recovery.

Light Commercial Vehicles (LCVs): This category could see a moderate 3-5% growth. While last year’s slowdown was fueled by high base effects and competition from electric three-wheelers, a stabilizing e-commerce sector and improved financing conditions might aid a rebound.

Buses: The real standout! The bus segment is forecasted to surge by 8-10% in FY26, following an already impressive 11-14% jump in FY25. The ongoing government vehicle scrappage program is a major catalyst, pushing state road transport undertakings (SRTUs) to invest in new fleets.

The Rise of Alternative Fuels

Diesel still rules the Indian CV industry, commanding an 88% share in FY25. However, the tides are shifting. Compressed Natural Gas (CNG), Liquefied Natural Gas (LNG), and electric vehicles (EVs) are gaining ground, particularly in urban transport. The bus segment has seen the most rapid EV adoption, with penetration reaching 5%. Expect this trend to accelerate.

Financial Outlook & Challenges

Profitability & Investments: Operating profit margins (OPM) for original equipment manufacturers (OEMs) are expected to remain steady at 11-12% in FY25 and FY26. Meanwhile, capital expenditure is projected to soar to ₹58-60 billion, up from ₹34 billion in FY24, as companies channel funds into new powertrain technologies and innovation.

Regulatory Pressures: New mandates will impact cost structures. For instance, starting October 2025, all trucks must come equipped with air-conditioned cabins—a move that will increase vehicle prices by ₹20,000-30,000 per unit. Compliance costs and evolving safety standards could pose hurdles for small fleet owners.

Final Thoughts

India’s commercial vehicle sector is on the road to recovery, albeit with a few speed bumps along the way. A combination of infrastructure growth, rising replacement demand, and policy-driven changes will define its trajectory. While challenges like regulatory compliance and cost inflation persist, strategic investments in alternative fuels and technological advancements could reshape the industry’s future.Stay tuned with 91trucks for all the latest news and updates related to new launches, commercial vehicles and industry insights. 91trucks is the fastest-growing digital platform aimed at providing you with the latest updates and information related to the commercial vehicle industry.