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MHCV Boom to Continue Till FY28 on Replacement Demand, Says Report

The Medium and Heavy Commercial Vehicle segment is projected to maintain strong growth until FY27-28, according to a Yes Securities analysis. Near-term demand will be fueled by the replacement of an ageing fleet, with nearly 2 million units over 8.5 years old. Continued infrastructure spending, improved fleet utilization, and anticipated pre-buying ahead of BS7 emission norms in 2028 will support long-term growth. The report also indicates the sector's resilience to potential diesel price increases, citing efficient fuel cost pass-through mechanisms.

Key Points: MHCV Growth Robust Till FY28 on Fleet Replacement: Report

  • 42% of fleet is 8.5-10 years old
  • Growth driven by replacement & infra funds
  • BS7 norms by 2028 may spur pre-buying
  • Resilient to diesel price hikes up to ₹125/litre
2 min read

Commercial vehicle growth to remain robust till FY28 on replacement demand: Report

A Yes Securities report forecasts 6-8% CAGR for MHCVs till FY31-32, driven by an ageing fleet, infra spending, and pre-BS7 buying.

"MHCV cycle likely to stay strong over FY27/28; 6-8% vols CAGR likely before TIV stabilizes in FY31-32 - Yes Securities Report"

New Delhi, April 14

The Medium and Heavy Commercial Vehicle segment is expected to remain strong through FY27-28, according to a report by Yes Securities.

The report estimates a 6-8 per cent compound annual growth in volumes until total industry volumes (TIV) stabilise around FY31-32.

"MHCV cycle likely to stay strong over FY27/28; 6-8% vols CAGR likely before TIV stabilizes in FY31-32," the report noted.

Growth in the near to mid-term is likely to be driven by multiple factors. These include delayed vehicle replacements due to GST 2.0-related price changes and an ageing fleet. Around 42 per cent of vehicles are currently 8.5-10 years old, accounting for nearly 2 million units that may need replacement.

The report also highlighted that demand will be supported by the release of funds stuck in infrastructure projects over the past few months, a low base in the first half, and lean inventory levels entering FY27.

Beyond FY27, demand is expected to remain strong due to continued infrastructure spending, improved fleet utilisation, and pre-buying ahead of BS7 emission norms expected by 2028. Fleet utilisation has already improved to 70-75 per cent from earlier levels of 53-55 per cent. The upcoming BS7 norms could increase vehicle costs by 10-12 per cent.

The report noted that diesel price hikes have had limited impact on commercial vehicle volumes over the past 15 years, as most freight contracts allow fuel cost pass-through. However, higher fuel prices may still affect sentiment and delay purchase decisions temporarily. The sector is expected to remain resilient even if diesel prices rise to Rs 120-125 per litre.

"While fuel prices do not directly affect margins, they can still influence fleet sentiment and lead to temporary delays in vehicle purchases...Given recent crude spike, the industry would generally be resilient to diesel prices up to Rs 120-125/liter," the report stated.

It added that improvements in fuel management technologies have enhanced efficiency and reduced dependence on load-based fuel consumption.

Profitability remains highest in the Heavy Commercial Vehicle (HCV) segment, especially in tippers. Margins could improve by 1-1.5 per cent through cost optimisation, localisation, and lighter vehicle platforms.

Meanwhile, Light Commercial Vehicles (LCVs) are expected to provide steady growth as they are less cyclical compared to heavier segments.

- ANI

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Reader Comments

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Priya S
Good analysis, but the report seems to downplay the impact of high diesel prices on small fleet owners. Yes, contracts allow pass-through, but negotiating with clients every time prices jump is a headache and affects cash flow. The sentiment impact is real, not just 'temporary' for many of us. 🚛
A
Arjun K
The ageing fleet data is key – 2 million units needing replacement is a massive opportunity. This growth forecast till FY28 seems solid. Hope the government keeps up the infra spending and doesn't let projects get stuck again. That's what really drives the tipper and HCV demand.
S
Sarah B
Interesting read from an investment perspective. The resilience to fuel prices up to ₹125/litre is a strong point for sector stability. The shift to lighter platforms and better fuel tech is a positive long-term trend for efficiency and emissions.
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Vikram M
BS7 norms by 2028 will definitely cause a cost spike. Buyers should plan their purchases before that. The 10-12% increase is significant for a truck costing ₹30-40 lakhs. But it's necessary for cleaner air. Hopefully, the technology improves enough to offset some of the running costs.
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Karthik V
Steady growth in LCVs is the real story for me. They are the backbone of last-mile logistics, especially with e-commerce booming. Less cyclical means more stable jobs for drivers and helpers. This sector needs more policy focus too.

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