The Light Commercial Vehicle (LCV) segment is projected to register growth of 2–4%, while the Medium and Heavy Commercial Vehicle (MHCV) segment is anticipated to see a slightly stronger expansion of 4–6%.
“The commercial vehicle industry is expected to experience moderate growth, with overall sales volumes likely to improve year-on-year in FY26,” said Arti Roy, Associate Director at CareEdge Ratings.
“This recovery will be underpinned by increased infrastructure activity, improved rural sentiment on the back of a normal monsoon forecast, more attractive vehicle financing due to recent interest rate cuts, and ongoing fleet replacement—particularly in the bus segment—spurred by ageing vehicles, road tax concessions available for new vehicles under the scrappage policy, and the transition to electric vehicles (EVs),” she added.
In FY25, the CV industry grappled with multiple challenges, including election-related spending delays, elevated interest rates, and weaker demand. MHCV volumes inched up by just 1.2%, while LCV volumes dipped by 0.3%. The MHCV truck segment, which comprises about 80% of the category, shrank by 2.7% due to sluggish freight demand and delayed infrastructure projects. However, the MHCV bus segment performed robustly, posting 21.6% growth, driven by rising demand for public transport and the adoption of electric buses.
“The CV industry had been on track to surpass its FY19 peak after strong performances in FY22 and FY23,” said Hardik Shah, Director at CareEdge Ratings. “But cyclical challenges in FY24 and FY25—such as high inventory, cost pressures, and the regulatory transition to BS-VI norms—led to a slowdown. Many of these headwinds are now easing, which bodes well for FY26.”
Improved financing conditions are expected to play a crucial role in the recovery. Between February and June 2025, the Reserve Bank of India cut the repo rate by 100 basis points. As lenders pass on these reductions, vehicle financing is likely to become more accessible, particularly for small fleet operators in the LCV segment.
Additionally, replacement demand—driven by ageing fleets and incentives under the government’s scrappage policy—is expected to further support volume growth. Several states have announced road tax concessions of 15–25% for new vehicle purchases following the scrapping of old ones.
The LCV passenger carrier segment saw nearly 8% growth in FY25, supported by rising urban mobility and last-mile transport demand. In contrast, the goods carrier segment contracted by 1% amid weak rural consumption, slower e-commerce growth, and increased competition from electric cargo three-wheelers. This segment is expected to rebound in FY26, helped by improved affordability and easing credit conditions.
Looking ahead, the industry is preparing for regulatory changes in FY26–FY27, including the mandatory implementation of air-conditioned truck cabins starting October 2025, and the rollout of Bharat Stage V (TREM-V) emission norms for non-road vehicles from April 2026.
“These regulations are likely to increase vehicle costs, potentially triggering a pre-buying phase in FY26 ahead of their enforcement. The above factors are collectively expected to result in growth of around 2–5% in overall CV volumes during FY26,” CareEdge Ratings stated.