Commercial Vehicle Sales Expected to Grow 2-5% in FY26, CareEdge Ratings Forecasts

Commercial vehicle sales in India are projected to increase by 2-5% in the fiscal year 2026, according to CareEdge Ratings, marking a recovery after two consecutive years of muted growth. The Mumbai-based rating agency released its forecast on July 7, 2025, indicating that both light commercial vehicles and medium and heavy commercial vehicles will contribute to the upturn.

The Light Commercial Vehicle segment is expected to grow by 2-4% in FY26, while the Medium and Heavy Commercial Vehicle segment is projected to expand by 4-6% during the same period. CareEdge Ratings attributes the anticipated recovery to increased infrastructure activity, improved rural sentiment following normal monsoon forecasts, and more attractive vehicle financing due to recent interest rate cuts.

Arti Roy, Associate Director at CareEdge Ratings, stated that the recovery will be supported by ongoing fleet replacement, particularly in the bus segment, driven by aging vehicles and road tax concessions available for new vehicles under the scrappage policy. The transition to electric vehicles is also expected to contribute to growth.

The commercial vehicle industry experienced challenging conditions in FY25, with overall volumes remaining largely flat. Medium and Heavy Commercial Vehicle volumes increased by just 1.2%, while Light Commercial Vehicle volumes declined by 0.3%. The subdued performance was attributed to lower government spending on infrastructure due to general elections, an extended monsoon that disrupted construction work, and increased competition from electric cargo three-wheelers.

Within the MHCV segment, buses showed strong performance with a 21.6% increase in FY25, driven by rising demand for public transport and government fleet replacement initiatives. However, MHCV trucks, which constitute approximately 80% of the MHCV segment, recorded a 2.7% decline due to reduced freight activity and delayed infrastructure projects during the election period.

The Reserve Bank of India's cumulative 100 basis point reduction in the repo rate between February 2025 and June 2025 is expected to have a positive impact on vehicle financing in FY26. This monetary policy adjustment is anticipated to improve affordability for small fleet operators as lending rates gradually adjust downward.

Hardik Shah, Director at CareEdge Ratings, noted that the Indian commercial vehicle industry had reached its highest sales volume in FY19. After being impacted by the COVID-19 pandemic, the industry showed signs of recovery in FY22 and FY23 but experienced a cyclical decline in FY24 and flat volumes in FY25 due to factors including higher channel inventory, infrastructure project slowdowns, and elevated interest rates.

The industry is expected to face regulatory changes in FY26-FY27, including mandatory air-conditioning cabins in trucks starting October 2025 and the proposed introduction of TREM-V emission norms for non-road vehicles from April 2026. These regulations are likely to increase vehicle costs, potentially triggering advance purchases ahead of their implementation.

Replacement demand, driven by aging fleets and the government's scrappage policy for older vehicles, is expected to support overall commercial vehicle volumes. Several Indian states have announced road tax concessions ranging from 15% to 25% for fleet operators purchasing new vehicles after scrapping older ones.

CareEdge Ratings, established in 1993, is India's second-largest rating agency and provides credit ratings, analytics, consulting, and sustainability services across diverse sectors.