The domestic commercial vehicle (CV) market in India is set to experience a significant upswing, with projections indicating that volumes will reach 1 million units by the end of FY26, matching the pre-pandemic peak of FY19. According to the ratings agency Crisil, this growth is being driven by a combination of factors, including accelerating infrastructure development, replacement demand, and policy support from initiatives such as the PM-eBus Sewa scheme. This recovery marks a significant milestone for the sector, which has seen fluctuations due to the pandemic and subsequent market challenges.

The growth is expected to be primarily led by the light commercial vehicle (LCV) segment, which is forecast to account for 62% of total CV volumes in FY26. The surge in demand for LCVs is largely attributed to the booming e-commerce sector and expanding warehousing needs, especially in Tier 2 and Tier 3 cities. With the e-commerce industry in India experiencing rapid growth, the need for efficient last-mile delivery solutions has increased, driving the demand for LCVs, particularly small trucks and delivery vans.

In addition to this, the growth in freight-intensive industries such as cement and mining will further boost demand for commercial vehicles, especially in medium and heavy commercial vehicles (M&HCVs). Crisil forecasts a modest 2-4% growth in M&HCV volumes, which make up 38% of total CV volumes. The growth in this segment is largely supported by the increased infrastructure spending in sectors like construction, roads, and metro-rail projects, which are expected to continue throughout FY26 and beyond.

Moreover, the overall credit outlook for the CV sector remains stable, thanks to strong liquidity and healthy cash flows within the industry. Crisil’s analysis, based on the performance of four key CV players representing around 70% of sector volume, suggests that inflation easing and declining interest rates will help stimulate deferred replacement demand. This demand is especially strong among fleet owners who had purchased vehicles between FY17-19, during a period of high vehicle costs and interest rates.

One of the most significant developments contributing to growth in the electric vehicle (EV) segment is the launch of the PM-eBus Sewa scheme. Announced in August 2023, the scheme has a budget of Rs. 57,613 crore and aims to deploy 10,000 electric buses across 100 cities in India. This initiative is expected to catalyse growth in the electric bus segment, which has gained significant traction in recent years due to the government’s focus on reducing carbon emissions and promoting cleaner energy sources for urban transport.

The PM-eBus Sewa scheme is a part of the government's broader effort to promote green transportation and sustainable mobility in urban areas. By accelerating the adoption of electric buses, the scheme is not only aiming to provide more sustainable transportation options but also to reduce the carbon footprint of the public transport sector. This is expected to further contribute to the growth of the overall CV market, as the demand for electric commercial vehicles increases.

Looking ahead, Crisil projects a 3-5% growth in total CV volumes this fiscal year (FY26), in line with the sector’s long-term growth trends. This growth trajectory reflects the strong demand fundamentals within the sector, supported by both domestic and international factors, including e-commerce, infrastructure development, and the government's support for electric vehicles.

In conclusion, the outlook for India’s commercial vehicle sector is bright, with the light commercial vehicle (LCV) segment leading the charge, followed by steady growth in the medium and heavy commercial vehicle (M&HCV) categories. With e-commerce, infrastructure projects, and policy support driving demand, the market is poised for strong growth in FY26, making it a critical year for the sector’s recovery and expansion. The PM-eBus Sewa scheme and other government initiatives will further boost the transition towards more sustainable and electric vehicles, positioning India as a leader in the global commercial vehicle market.

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