Key Points

This is due to accelerating infrastructure execution, replacement demand and policy support from the PM-eBus Sewa scheme. The sector’s credit outlook remains stable, supported by strong liquidity and healthy cash flows.

Light commercial vehicles (LCVs), which will be 62 per cent of total volume, will lead the growth, driven by rising penetration of e-commerce and warehousing, while a pickup in freight-intensive sectors such as cement and mining will boost overall demand.

“Domestic CV volume should grow 3-5 per cent this fiscal, rebounding from last fiscal’s slowdown and aligning with the sector’s long-term growth trend,” said Anuj Sethi, Senior Director, Crisil Ratings.

The recovery will be driven by a revival in infrastructure execution – an anchor for CV demand – which gained momentum in the last quarter of fiscal 2025 and is likely to sustain on the back of a 10-11 per cent rise in central government capex.

“A strong replacement cycle, expected to account for about a fifth of the volume, will further support demand,” Sethi added.

Regulatory changes will reshape the CV landscape this fiscal, with mandatory air-conditioned cabins in trucks from October 2025 likely increasing costs by at least Rs 30,000 per unit, particularly for medium and heavy commercial vehicles (M&HCVs).

For the record, CV makers have already increased prices by 2-3 per cent in January to offset the rise in compliance costs.

Softening input costs should support an operating margin of 11-12 per cent in line with the decadal high logged last fiscal.

While capital expenditure (capex) for regulatory upgrades and electric platform development will rise 12-15 per cent, strong cash flows will keep debt levels low and balance sheets healthy.

The M&HCV volume, comprising 38 per cent of total volume, is expected to grow 2-4 per cent this fiscal, led by increased infrastructure spending across construction, roads and metro-rail projects.

LCVs may grow faster at 4-6 per cent, driven by ecommerce-led deliveries and expansion of warehouses in tier 2 and 3 cities.

Easing inflation and interest rates will boost deferred replacement demand from the ageing fleet bought during fiscals 2017-2019, thus supporting overall growth, said the report.

In the electric bus segment, the PM-eBus Sewa scheme will catalyse demand, albeit on the current base of 3,200 units.

—IANS

- IANS