After nearly three years of subdued sales, India’s commercial vehicle market is roaring back to life. A decisive policy move, coupled with the country’s seasonal upswing in freight and infrastructure activity, has set the stage for a stronger-than-expected recovery in medium and heavy commercial vehicles (MHCVs) during the second half of the fiscal year.
Total industry volumes (TIV), which had languished around 375,000 units, are now projected to surpass earlier expectations of 6–7% growth. The tone across the industry has shifted from cautious optimism to quiet confidence, tempered only by the question of how long the rebound will last.
For context, while infrastructure projects and revived logistics supported 3.2% growth in H1 FY2026, retail sales in specific segments like Medium and Heavy Commercial Vehicles (M&HCVs) contracted temporarily as fleet owners deferred purchases in anticipation of the tax reform. ICRA, in its October 30 note, forecasts a modest 3–5% wholesale growth for the CV industry in FY2026, with the bus segment expected to lead.
Demand Returns, Beginning with Retail
Evidence of revival was most visible in October. Manufacturers saw a 10% year-on-year increase in total industry volumes, with the Intermediate Commercial Vehicle (ICV) segment, covering trucks in the 7.5 to 18.5-ton range, posting a more robust 13% growth. The surge, led by retail customers, is being attributed largely to a recent restructuring of the Goods and Services Tax (GST).
“The GST reduction has helped retail customers who were at a disadvantage before this change,” said Sanjeev Kumar, president of MHCV at Ashok Leyland. The policy shift also altered the way operators approach purchases. Until recently, large fleet buyers could claim a 28% Input Tax Credit (ITC). That has now been reduced to 18%, a move that rebalances incentives between big and small operators.
Before the change, many buyers purchased trucks to benefit from tax offsets, Kumar explained. Now, buying decisions are more closely tied to genuine transport demand. “This will create a healthy transport and logistics environment with stronger fundamentals,” he added.
The alignment of incentives across operators, analysts say, is helping correct a long-standing structural distortion in the market. Smaller logistics owners, representing a large portion of India’s road freight network, find themselves in a stronger position as the fiscal gap narrows.
Capacity Ready, Eyes on Sustainability
Ashok Leyland and its peers have adjusted production schedules to capture the demand rebound. “We have capacities,” Kumar noted, adding that production plans are already being fine-tuned to align with new booking trends.
Still, manufacturers remain wary of reading too much into short-term spikes. “We will watch for November also,” Kumar said. “We need to see whether this demand is sustainable. So probably November would indicate that.”
Industry watchers suggest that a clearer picture will emerge as replacement buying gathers momentum. The motivation for fleet renewal, Kumar pointed out, depends heavily on operators’ confidence in India’s consumption cycle. “There is a consumption story which is slowly building,” he said, stressing how sentiment is driving replacement demand in the haulage segment more than in infrastructure-linked categories.
Tracking the Pulse of the Economy
Several macro indicators underscore this improved sentiment. The number of e-way bills—documents required for inter-state goods transport—has risen by 21% year-on-year. Traffic volumes, a proxy for fleet utilization, are up 13%. Even the manufacturing index, though modest in scale, shows a nearly 2% rise compared with last year.
“These numbers reflect a genuine pick-up in underlying activity,” Kumar said.
Infrastructure Push Bolsters H2 Outlook
Historically, the second half of any fiscal year delivers stronger sales for India’s truck industry, buoyed by mining and construction projects that resume after the monsoon. This time, even lingering rains failed to dampen momentum. Steel and cement production, key barometers for infrastructure health, grew by nearly 10%, while mining activity, paused during the rainy months, has resumed following new coal block allocations.
The convergence of industrial demand, logistics expansion, and fiscal policy easing is feeding expectations that H2 FY2026 will outperform earlier projections.
Aftermarket Emerges as a Profit Engine
In an industry known for its cyclicality, the aftermarket business has become a stabilizing force. The segment, covering parts, spares, and service, has grown six-fold over the last decade.
This growth stems from aggressive efforts to boost parts penetration, which has climbed from roughly 20–22% in 2016 to around 45% today. “This business keeps increasing our penetration, and anything above 50% is very, very good,” Kumar said. Achieving that level would be unprecedented in India’s commercial vehicle sector, where the industry average hovers near 25–30%.
The company’s aftermarket network now spans nearly 150 distributors, 1,100 dealer-service outlets, and a secondary network of some 750 exclusive parts stores, 10,000 retailers, and 40,000 independent mechanics. This ecosystem, increasingly digitized, provides both revenue stability and customer stickiness—factors that help cushion cyclical downturns in vehicle sales.
Filling White Spaces in the Portfolio
Despite its extensive model range, Ashok Leyland sees further room to expand. The company, based in Chennai, is pursuing what Kumar calls “white space” opportunities—untapped sub-segments that could round out its portfolio.
While the automaker already holds about 40% share in the domestic bus market, it plans to address gaps in fully built buses for staff and school transport, particularly in the ICV category. On the upper end, the company is focusing on specialized logistics such as transporting oversized consignments, including wind turbine blades. These niche applications, Kumar said, are expected to consolidate Ashok Leyland’s market leadership and drive incremental growth.
Regulatory Shifts Ahead
The next wave of regulation promises to reshape vehicle design and costs. Air-conditioned driver cabins in trucks and Electronic Stability Control (ESC) are already mandatory in buses. Coming next are seven or eight new safety-related regulations, expected to roll out gradually through 2027–2029.
“There are many changes again, mainly related to the safety of the vehicles,” Kumar noted. While specific notifications are pending, industry executives anticipate that the timeline for compliance will be staggered to give manufacturers room to adapt.
The Evolving Powertrain Mix
Kumar acknowledged the complexity of India’s powertrain transition. Hydrogen, he said, “is a long-term game” and has taken a back seat for now. Electric trucks, though still in small volumes—about a hundred units monthly—are gaining traction in specialized environments such as cement plants, ports, and mining operations.
Corporate and new-age fleet buyers are driving this trend, drawn by operational benefits that go beyond cost. “Driver comfort is very high and driver fatigue is low,” Kumar said, citing user feedback from trials.
Yet challenges persist. Extending the practical range from 200 km to around 300 km remains a technical priority, as does achieving cost parity through an improved Total Cost of Ownership (TCO). Electricity tariffs and uneven state-level incentives continue to complicate the equation.
Liquefied natural gas (LNG) vehicles, meanwhile, are finding moderate acceptance among legacy operators in the steel and mining sectors, albeit at less than 100 units a month. Their appeal lies in operational familiarity, given the similarity of LNG systems to conventional diesel trucks.