Commercial vehicle sales may touch 1 mn mark in FY26 after 7 yrs: Crisil

LCVs to account for 62% of volumes

After a lull spanning seven years, India’s commercial vehicle (CV) industry is set to reclaim its pre-pandemic peak, with domestic sales expected to touch the one million mark in the current financial year. Driving this resurgence will be light commercial vehicles (LCVs), which are projected to account for nearly 62 per cent of total volumes, thanks to a growing e-commerce ecosystem and expanding warehousing in Tier-II and Tier-III cities. This resurgence marks a recovery to levels last seen in the pre-pandemic peak of FY19.

 

According to Society of Indian Automobile Manufacturers (Siam) data, commercial vehicle manufacturers dispatched 1,007,319 units across India in FY19.

   

In FY25, 956,671 units of CVs were dispatched in wholesales, Siam data said. This was down by 1.2 per cent from the previous financial year. But the silver lining is that Q4FY25 has seen an uptick in demand, with CV sales going up by 1.5 per cent.

 

According to a Crisil Ratings report, domestic CV sales volumes are set to grow 3–5 per cent this financial year, rebounding from a muted performance last year and aligning with the sector’s long-term growth trend. A revival in infrastructure execution, supported by a 10–11 per cent increase in central government capital expenditure, is expected to act as a key demand catalyst. The replacement cycle, particularly for fleet vehicles purchased during FY17–FY19, is also expected to play a significant role—potentially contributing up to 20 per cent of the volume.

 

“Accelerating infrastructure execution, a robust replacement cycle, and policy measures like the PM-eBus Sewa scheme are helping the sector bounce back,” said Anuj Sethi, senior director at Crisil Ratings. “Medium and heavy commercial vehicle (M&HCV) sales should grow 2–4 per cent, driven by construction, roadwork, and metro-rail projects.”

 

Meanwhile, LCVs are expected to clock a faster growth rate of 4–6 per cent, thanks to steady demand from logistics, e-commerce, and local transport. The sector’s credit outlook remains stable, buoyed by strong liquidity and healthy cash flows. Crisil’s analysis of four major CV players—who together account for about 70 per cent of the industry’s volume—suggests that the companies are in a solid financial position, with debt-to-Ebitda ratios around 1 and interest coverage at approximately 10 times.

 

A key regulatory change shaping the industry’s trajectory is the mandate for air-conditioned truck cabins starting October 2025. The requirement is expected to increase per-unit vehicle costs by at least Rs 30,000, especially impacting the M&HCV segment. CV makers had already implemented a 2–3 per cent price hike in January 2025 to offset rising compliance costs, and further selective hikes are anticipated.

 

“While regulatory costs are rising, CV manufacturers will continue to protect their margins, which are expected to remain in the 11–12 per cent range—matching the decadal high seen last financial year,” said Poonam Upadhyay, director at Crisil Ratings.

 

Capital expenditure (capex) spending across the industry is also on the rise, projected to grow 12–15 per cent this financial year as companies invest in safety upgrades, emission compliance, and electric vehicle (EV) platform development. Leading players are expected to spend around Rs 4,500 crore, though strong cash generation is likely to keep balance sheets healthy. The capex-to-Ebitda ratio is projected to stay below 0.3, reflecting prudent capital allocation.

 

The electric bus segment, while still at a nascent stage with a base of about 3,200 units, is expected to receive a boost from the government’s PM-eBus Sewa scheme. Launched in August 2023, the scheme aims to deploy 10,000 electric buses across 100 cities, with a budget of Rs 57,613 crore.