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New Delhi: The commercial vehicle (CV) industry in India has come out of the pandemic with a strong recovery and is now moving into a more cautious growth phase. Government infrastructure spending and replacement purchases and better freight movement continue to support demand, but at a slower rate, as the industry works off a higher base from the previous financial year.
This sentiment is echoed by rating agency ICRA, which has forecasted that domestic commercial vehicles wholesale volumes will expand by 4-6% in FY2026-27. The agency anticipates growth will continue in the sector, driven by robust economic activity, ongoing public capital spending and moderate demand in most vehicle segments.
ICRA’s forecast follows a widespread recovery in FY26, which has pushed the comparison base for the current financial year to a higher level. Growth is likely to continue to be positive, but will be expected to normalise following the strong bounce back in recent years.
Recent sales data also indicates that sales are continuing to move along at a steady pace. Domestic commercial vehicle wholesale volumes increased 13.5% year-on-year in May 2026, but decreased 1.1% compared with April. Retail sales were also positive, rising 5.3% year-on-year in the month, but falling 18.3% month-on-month, reflecting the impact of seasonal factors on monthly sales.
The agency anticipates different growth rates by vehicle segment. The light commercial vehicle (LCV) segment is expected to grow by 6-8% in FY27, with e-commerce, urban logistics, and last-mile delivery services driving the demand. The segment is expected to be supported by the growth of organised retail, quick commerce and intra-city transportation.
The bus segment is expected to outperform the other segments with ICRA projecting a growth of 7-9% for the year. Replacement demand from state transport undertakings, fleet modernisation by private operators and a steady increase in passenger mobility are likely to boost purchases.
Medium and heavy commercial vehicle (M&HCV) trucks, on the other hand, are projected to experience relatively modest growth of 1-3%. The freight segment is also expected to see lower growth than the LCV and bus categories, as demand and infrastructure activity will be supportive, but the segment is off a better base.
The industry’s outlook is still being backed by continued investment in infrastructure. Heavy trucks and construction related vehicles are likely to have consistent demand as ongoing investments are made in highways, roads, rail connectivity, mining and construction projects. Over the last several years, government capital spending has been an important growth contributor to the commercial vehicle industry and industry analysts believe that will continue.
Another important consideration is replacement demand. Many of the commercial vehicles bought in previous growth cycles are now nearing the end of their useful life and fleet owners are looking to invest in newer and more fuel efficient vehicles. Meanwhile, the availability of transport services has increased and the utilisation of the fleets has remained relatively stable, giving transport operators better cash flow and enabling them to make new investments.
But there are risks in the forecast. Any delay in the implementation of infrastructure, a decline in industrial production or a continued slowdown in freight demand could impact wholesale volumes, ICRA notes. Other factors that affect purchase decisions, especially for smaller fleet operators, are higher operating costs, fuel price changes and financing conditions.
There are also some slow changes in vehicle technology in the industry. Electric commercial vehicles are gradually becoming more popular in the light commercial vehicle market, particularly in urban delivery, where the operating range of electric vehicles is still not as long as that of diesel-powered vehicles, and refuelling infrastructure is not yet as developed.
FY27 is likely to be a year of consolidation and not a year of growth in many aspects. Growth will slow down from last year’s level but the demand drivers are still in place. The commercial vehicle industry will continue to have a solid basis for wholesale volumes to increase by 4-6% during the financial year, with continued infrastructure investment, replacement demand and expanding logistics activity.
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