Tata Motors Sees Signs of Recovery in India's Commercial Vehicle Market

India's commercial vehicle market is showing signs of stabilization after a challenging period, with indicators pointing towards a modest recovery. While overall industry volumes saw only a marginal improvement in the final quarter of fiscal year 2025 (Q4 FY25) compared to the previous year, this marked a positive shift following significant double-digit declines in the second quarter and single-digit declines in the third.

Against this backdrop, Tata Motors' CV division posted its highest-ever profit before tax (PBT), demonstrating financial resilience despite mixed market signals. For the full year, while overall revenues declined by 4.7%, EBITDA stood at 11.8% (up 100 bps YoY), as mix and realizations were optimized. The business delivered the highest-ever profits of Rs 6,600 crore and a strong ROCE of 37.7%.

Girish Wagh, Executive Director at Tata Motors, said in a post-results analyst call, “Now in Q4, the TIV has been either flat or slightly growing over the previous year, which is actually a good sign.”

Key operational metrics in the trucking sector reflect the improving environment. Average utilization of trucks and buses has grown quarter-on-quarter. This is crucial for the profitability of transport operators, which has also seen a marginal improvement. Supporting this uptick, freight rates rose by approximately 1% to 2% in Q4. The company executives attributed this to better vehicle utilization, driven by stronger movement of commodities, stable agricultural sentiment, seasonal demand for goods like white goods, and increased activity in the infrastructure and mining sectors. “The transporter profitability has also improved marginally,” Wagh added.

An internal sentiment index tracked by Tata Motors shows Tipper sentiment has improved marginally, correlating with good mining and infrastructure activity. However, sentiment remained largely flat for segments like Heavy Commercial Vehicle (HCV) Cargo, Intermediate Light Medium Commercial Vehicle (ILMCV), and Small Commercial Vehicle (SCV) Pickup. Commodity prices remained range-bound during the quarter, though the recent Steel Safeguarding Duty is expected to have an impact.

Within this market landscape, Tata Motors' domestic CV volume market share stood at 37.1% for the year. The company reported that its trucks and passenger segments performed better than the industry average, with the passenger segment seeing a 100% improvement in market share. However, the company noted a decline in market share for the SCV Pickup segment, identifying this as an area requiring focus.

Looking ahead, the outlook for the domestic CV market in FY26 anticipates sustained single-digit growth. This projection is based on stable macroeconomic indicators, improving fleet utilization, and a consistent sentiment index. Growth is expected to be slightly better for the HCV and bus segments, while it is anticipated to be lower for ILCV and SCV, the top executive noted.

Upcoming regulatory changes, such as the mandatory AC fitment in trucks based on a June 8th manufacturing date deadline, are also a focus for the industry. Tata Motors is preparing its entire truck portfolio for this change, noting that the cost increase in percentage terms will be lower for HCVs (around 0.5% to 0.6%) compared to ILMCVs (around 1% to 1.2%). While acknowledging a minor impact on fuel efficiency, the company believes the overall price increase and fuel efficiency effect will not present a significant headwind. “As a company, I think as we have been saying, we don’t just comply with the regulations, but we always come up with some value enhancements, and therefore the product makes sense for the customer,” Wagh continued.

Despite potential impacts from rising commodity costs and the AC mandate, the industry appears cautiously optimistic, banking on improving utilization and continued infrastructure spending to drive modest growth in the coming fiscal year.