Sustained infra push, increased mining and replacement demand will boost CV growth by 3-5% in FY26: ICRA

This marks a recovery following a largely flat performance in FY2025, impacted by a demand slowdown in the first half of the fiscal due to the General Elections.

According to Kinjal Shah, Senior Vice President & Co-Group Head, ICRA, "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."

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

The replacement demand remains a key contributor to growth, particularly for medium & heavy commercial vehicles (M&HCVs), which have an average fleet age of approximately 10 years.

Among the various sub-segments, M&HCV (trucks) wholesale volumes are likely to grow by 0-3 per cent YoY in FY2026 after experiencing a flattish growth or slight contraction in FY2025.

The segment saw a 7 per cent YoY contraction in the first nine months of FY2025, with tippers declining by 11 per cent and haulage and tractor-trailer sub-segments each dropping by 5 per cent.

The light commercial vehicle (LCV) truck segment is forecasted to expand by 3-5 per cent YoY in FY2026, driven by infrastructure recovery and an improving economic environment.

However, the segment declined by 3 per cent YoY in 9M FY2025 due to a high base effect, slowed e-commerce demand, and competition from electric three-wheelers (e3Ws).

Encouragingly, state road transport undertakings (SRTUs) are increasingly replacing ageing fleets, driving an anticipated 8-10 per cent YoY growth in FY2026 after an 11-14 per cent increase in FY2025. This segment is set to surpass the historic high volumes of FY2013 by FY2025.

Diesel continues to dominate the CV market, with a penetration of ~88 per cent in YTD FY2025. Alternative fuels, including CNG, LNG, and electric, hold the remaining market share. Electric vehicle (EV) penetration remains relatively higher in the bus segment at 5 per cent in YTD FY2025.

The implementation of Dedicated Freight Corridors (DFCs) will primarily impact container traffic on the Western corridor, while general road freight is expected to remain stable. Additionally, increasing freight rates are expected to support demand.

A notable mandatory regulatory development of air-conditioned cabins for trucks starting October 2025, will increase vehicle prices by Rs. 20,000-30,000.

ICRA projects operating profit margins (OPMs) for domestic CV original equipment manufacturers (OEMs) to stay within 11-12 per cent in FY2025 and FY2026, an improvement over 10.7 per cent in FY2024.

Capital expenditure (capex) and investments in the industry are anticipated to rise to Rs. 58-60 billion in FY2025 and FY2026, compared to Rs. 34 billion in FY2024. These investments will focus on product development, alternate powertrains, technology upgrades, and maintenance. (ANI)