India’s commercial vehicle (CV) industry is expected to clock a record overall volume of 12.4 lakh units in fiscal 2027, surpassing the previous peak of fiscal 2019. The industry had a strong outing in fiscal 2026, with a 13% rebound. Coming off that high base, growth is expected to moderate to 5–6%.
Domestic demand to remain key growth driver
Domestic demand will remain supportive, driven by infrastructure-led activity, steady replacement demand, and continued benefits from improved affordability following the rationalisation of Goods and Services Tax (GST) rates last year. Exports, however, could see some near-term disruptions due to ongoing developments in West Asia, a Crisil Ratings analysis shows.
Industry segmentation and market share dynamics
The industry is broadly categorised into light commercial vehicles (LCVs) and medium and heavy commercial vehicles (MHCVs), with buses forming a sub-segment within each. The domestic market drives around 92% of the overall volume, with exports accounting for the remainder.
Fy26 recovery driven by multiple factors
Fiscal 2026 marked a strong domestic recovery, driven by several factors. The GST rate cut from 28% to 18% in September 2025 significantly improved purchase economics, unlocking deferred demand. Additionally, easing interest rates, improving freight utilisation, and a pickup in infrastructure and mining activity reinforced the recovery.
Growth outlook across vehicle segments
Crisil Ratings Senior Director Anuj Sethi said: “Domestic demand momentum is expected to continue this fiscal, albeit with some growth moderation owing to a higher base. LCVs, accounting for 60% of the industry volume, are projected to grow 5–6%, driven by e-commerce and last-mile delivery demand, while MHCV volumes are expected to expand 4–5%, supported by freight movement and infrastructure spending.”
Shift towards higher capacity vehicles
Within LCVs, vehicles above 2 tonne gross vehicle weight (GVW) now account for 73%, up from 60% in fiscal 2020, as fleet operators increasingly prioritise payload efficiency over unit addition. For MHCVs, the completion of both dedicated freight corridors (DFC) introduces competition from a viable rail alternative for long-haul freight. The extent to which bulk demand migrates to rail will bear watching for replacement volumes.
Bus segment to see steady growth and electrification
The bus segment is expected to grow 3–4% in fiscal 2027, supported by replacement demand and government-led electric bus procurement. Although buses remain a small sub-segment, electrification in this category is expected to progress faster than in any other CV category, with penetration still in low single digits but rising steadily.
Exports may face near-term headwinds
Crisil Ratings Director Poonam Upadhyay said: “Exports, at 8% of overall CV volume, may see a sharp deceleration to 2–4% growth in fiscal 2027 from 17% in fiscal 2026. West Asia, accounting for nearly a quarter of exports, is the key reason, with shipping disruptions deferring dispatches rather than reflecting lost demand.”
Margins under pressure from rising input costs
Revenue growth is expected to marginally outpace volume growth, driven by calibrated price increases. However, rising input costs (such as steel, aluminium, and fuel) due to the geopolitical situation in West Asia may compress operating margins by 40–50 basis points from 12% in fiscal 2026. A sharper or more sustained rise in costs could exacerbate this, as aggressive price pass-throughs risk negatively impacting demand.