ICRA: Commercial Vehicle Industry Set for ₹58-60 Mn Capex growth in FY26

The Indian commercial vehicle (CV) industry is set to witness a significant increase in capital expenditure (capex) and investments, estimated at ₹5800-6000 crore for FY2025 and FY2026, compared to ₹34 billion in FY2024, according to rating agency ICRA. These investments will primarily focus on product development, alternative powertrains, technology upgrades, and maintenance-related initiatives.

A key regulatory change in the industry is the mandatory installation of air-conditioned cabins in trucks from October 2025, which is expected to increase vehicle prices by ₹20,000-30,000.

ICRA anticipates a 3-5 per cent year-on-year (YoY) growth in wholesale CV volumes in FY2026, following a stagnant FY2025, which was impacted by a demand slowdown in the first half due to the General Elections.

Kinjal Shah, Senior Vice President & Co-Group Head at ICRA, said the resumption of construction and infrastructure projects, stable rural demand, and higher replacement sales driven by ageing fleets and government mandates are expected to drive volume expansion from the latter half of FY2025 through FY2026.

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The medium and heavy truck segment is expected to grow by 0-3 per cent YoY in FY2026, following a flat or slightly negative trend in FY2025. In the first nine months of FY2025, the segment saw a 7 per cent YoY decline, with tippers contracting by 11 per cent and haulage and tractor-trailers each declining by 5 per cent. Recovery in infrastructure activity is expected to drive growth.

The light truck segment is projected to grow by 3-5 per cent YoY in FY2026, following a subdued FY2025. Growth will be driven by an improving economic environment and infrastructure projects. However, in the first nine months of FY2025, LCV sales declined by 3 per cent, impacted by high base effects, slower e-commerce growth, and competition from electric three-wheelers.

The bus segment is expected to witness an 8-10 per cent YoY growth in FY2026, supported by strong replacement demand from State Road Transport Undertakings (SRTUs) and the scrappage of older government vehicles. This follows an anticipated 11-14 per cent expansion in FY2025, surpassing the previous peak recorded in FY2013.

Diesel continues to dominate the domestic CV market, accounting for 88 per cent of total sales in the year-to-date period of FY2025, while alternative fuels such as CNG, LNG, and electric vehicles make up the rest. Electric vehicles (EVs) are seeing higher penetration in the bus segment, reaching 5 per cent in the year-to-date period of FY2025.

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ICRA remains optimistic about the long-term growth of the domestic CV industry, driven by increased infrastructure investments, rising mining activity, and improved road connectivity. Additionally, replacement demand remains strong, as the M&HCV fleet is estimated to have an average age of around 10 years.

The development of Dedicated Freight Corridors (DFCs) is expected to enhance rail capacity, particularly affecting container traffic on the Western Corridor. However, overall road freight traffic is expected to remain stable. Rising freight rates could also provide further support for CV demand.