Domestic Commercial Vehicle Industry To Grow 3–5% In FY26: ICRA
A key regulatory change set to impact the industry is the mandatory installation of air-conditioned cabins for trucks from October.
The domestic commercial vehicle industry's wholesale volumes are expected to grow 3–5% year-on-year in the upcoming financial year, according to a report by credit ratings agency ICRA.
This follows an estimated flat performance in the current fiscal, primarily due to a demand slowdown in the first half of the fiscal, which was impacted by the general elections.
Factors like resumption of construction and infrastructure activities, steady rural demand, and an increase in replacement sales due to ageing fleets and government mandates will drive growth towards the end of fiscal 2024–25 and into fiscal 2025–26, according to ICRA Senior Vice President Kinjal Shah.
Shah emphasised that a sustained push in infrastructure development, rising mining activities, and improved road and highway connectivity will support volume growth in the coming years. The replacement demand is also expected to remain strong, particularly for medium and heavy commercial vehicles, where the average fleet age is estimated to be around 10 years.
Among the sub-segments, medium and heavy commercial vehicles' wholesale volumes are projected to grow 0–3% year-on-year in fiscal 2025–26 after experiencing flat or marginally negative growth in fiscal 2024–25. The light-commercial-vehicle segment is expected to see a moderate 3–5% year-on-year expansion in fiscal 2025–26, following a similar trend in fiscal 2024–25.
In the bus segment, replacement demand from state road transport undertakings due to the scrappage of older government vehicles has been a key driver. This trend is anticipated to result in an 8–10% growth in fiscal 2025–26 following an estimated 11–14% growth in fiscal 2024–25, surpassing the record-high volumes of fiscal 2013.
"ICRA expects the operating profit margin of domestic CV original equipment manufacturers to remain within 11–12% in FY2025 and FY2026, compared to 10.7% in FY2024," Shah said, attributing this to factors like lower raw material costs, price hikes by CV manufacturers and cost-rationalisation measures.
A key regulatory change set to impact the industry is the mandatory installation of air-conditioned cabins for trucks from October. This is expected to increase vehicle prices by Rs 20,000–30,000.
Capital expenditure and investments in the CV industry are also set to rise, reaching Rs 5,800–6,000 crore in fiscal 2024–25 and fiscal 2025–26, compared to Rs 3,400 crore in fiscal 2023–24.
