The Indian commercial vehicle (CV) industry is poised for modest growth, with ICRA forecasting a 3-5% year-on-year (YoY) increase in wholesale volumes for Financial Year (FY) 2026.

ICRA stated that the anticipated growth will be driven by multiple factors, including the resumption of construction and infrastructure activities, steady rural demand, and increased replacement sales due to ageing fleets and government regulations.

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Among CV segments, the Medium & Heavy Commercial Vehicles (M&HCV) truck category is expected to witness a marginal YoY volume growth of 0-3% in FY26, following a flattish or slightly negative trend in FY25.

The segment recorded a 7% YoY contraction in the first nine months of FY25, with tippers, haulage trucks, and tractor-trailers experiencing declines of 11% and 5%, respectively.

Meanwhile, Light Commercial Vehicles (LCVs) are projected to grow by 3-5% in FY26, after experiencing a marginal contraction in FY25 due to a high base effect, a slowdown in e-commerce, and rising competition from electric three-wheelers.

The bus segment remains a bright spot, with 8-10% YoY growth expected in FY26, following an 11-14% increase in FY25. The segment has also seen higher electric vehicle (EV) adoption, with a 5% penetration rate during the same period.

While diesel continues to dominate the CV industry with an 88% market share in FY25 (year-to-date), alternative fuels such as compressed natural gas (CNG), liquefied natural gas (LNG), and EVs are gradually gaining traction.

ICRA remains optimistic about the industry’s financial health, forecasting operating profit margins (OPM) for original equipment manufacturers (OEMs) to remain stable at 11-12% in FY25 and FY26, supported by stable raw material costs, price adjustments, and cost efficiencies.

Additionally, capital expenditure in the CV industry is expected to rise significantly to ₹58-60 billion in FY25 and FY26, up from ₹34 billion in FY24.

Investments will be focused on product development, alternative powertrain technologies, and overall technological advancements, ICRA added.