India’s Medium and Heavy Commercial Vehicle Industry Enters Next Growth Cycle

Key Highlights

• M&HCV volumes to grow 8% in FY26 and 10% in FY27.

• Rising freight rates are improving the profitability of fleet operators.

• High average truck age boosts replacement demand.

• Limited impact from Dedicated Freight Corridors.

• Upcycle is still in early stages with strong growth potential.

India’s medium and heavy commercial vehicle (M&HCV) industry is showing clear signs of entering a new growth phase after a period of slow expansion. According to a recent Nomura report, industry volumes are expected to grow by around 8% year-on-year in FY26 and further accelerate to 10% in FY27, supported by improving fundamentals and rising fleet profitability.

Strong Growth Outlook for FY26 and FY27

Nomura’s analysis indicates that the M&HCV segment is moving into the early stages of a cyclical upturn. While growth remained modest in recent years, demand is now gaining momentum. The report highlights that the industry has not yet crossed the peak volume levels seen in FY19, which suggests there is still significant room for expansion.

Key Factors Driving the Upcycle

Several structural and economic factors are supporting the recovery. Rising freight rates are improving earnings for fleet operators, while GST-related benefits have lowered the overall cost of vehicle ownership. In addition, the average age of trucks in India is estimated to be around 10 years, creating strong replacement demand, especially expected to peak during FY27–28.

Together, these factors are improving fleet operator economics, increasing cash flows, and boosting confidence in purchasing new vehicles.

Improving Fleet Operator Profitability

Nomura notes a clear improvement in fleet operator profitability due to better freight rates and cost efficiencies from GST implementation. Stronger cash flows are enabling operators to replace older vehicles and invest in new trucks, supporting steady volume recovery across the sector.

Early Stage of a Commercial Vehicle Upcycle

Despite the positive outlook, the report emphasizes that the current phase represents only the early stages of a commercial vehicle upcycle. Industry volumes are still below historical highs, indicating sustained growth potential over the medium term.

Nomura remains positive on the sector, citing improving demand visibility and strong prospects for a cyclical upturn.

Higher Growth Possible with Economic Support

According to the report, industry growth in FY27 could be even stronger if India’s economic growth accelerates. Factors such as higher consumption levels and lower interest rates could further support commercial vehicle demand.

Limited Impact from Dedicated Freight Corridors

Addressing concerns around the Dedicated Freight Corridor (DFC), Nomura stated that demand risks remain limited. Although the Eastern and Western DFCs are nearly 96% operational, non-bulk cargo, which accounts for about 30% of total freight, continues to depend heavily on road transport.

Due to the large and diversified freight base served by commercial vehicles, the report does not foresee any major negative impact on overall truck demand.

Sub-Segment Normalisation to Watch

Nomura did caution that some normalisation may occur in specific sub-segments. Tractor-trailers, which directly compete with bulk rail movement, have seen their share rise sharply from around 9% in FY21 to 22% in FY25. This rapid increase could lead to some moderation in this category going forward.

Long-Term Recovery Remains Intact

Overall, the report concludes that strong replacement demand, improving fleet economics, and supportive macroeconomic conditions position India’s M&HCV industry for a sustained recovery in the coming years. With fundamentals improving and demand visibility strengthening, the sector appears well-placed for steady growth beyond FY26 and FY27.

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CMV360 Says

India’s medium and heavy commercial vehicle industry is clearly entering a fresh growth phase. Rising freight rates, better fleet profitability, GST-led cost benefits, and an ageing truck population are driving replacement demand. With limited risk from freight corridors and supportive economic conditions, the sector is positioned for a steady and sustained recovery over the coming years.