The Medium and Heavy Commercial Vehicle (MHCV) segment is expected to remain robust through FY27–28, according to a report by Yes Securities.
The report projects a compound annual growth rate (CAGR) of 6–8 per cent in volumes until total industry volumes (TIV) stabilise around FY31–32.
“MHCV cycle likely to stay strong over FY27/28; 6–8% vols CAGR likely before TIV stabilises in FY31–32,” the report said.
Near- to mid-term growth is expected to be supported by several factors, including delayed fleet replacements due to GST 2.0-related price changes and an ageing vehicle base. Around 42 per cent of vehicles are currently in the 8.5–10-year age bracket, representing nearly 2 million units likely due for replacement.
The report also highlighted additional demand drivers such as the release of funds previously locked in infrastructure projects, a low base in the first half, and lean inventory levels heading into FY27.
Beyond FY27, demand is expected to stay strong, supported by sustained infrastructure spending, improved fleet utilisation, and pre-buying ahead of BS7 emission norms expected in 2028. Fleet utilisation has already improved to 70–75 per cent from earlier levels of 53–55 per cent, while BS7 regulations could raise vehicle costs by 10–12 per cent.
According to the report, diesel price increases have historically had limited impact on commercial vehicle volumes over the past 15 years, as freight contracts typically allow fuel cost pass-through. However, higher fuel prices may still temporarily dampen sentiment and delay purchase decisions. The sector is expected to remain resilient even if diesel prices rise to Rs 120–125 per litre.
“While fuel prices do not directly affect margins, they can still influence fleet sentiment and lead to temporary delays in vehicle purchases. Given the recent crude spike, the industry would generally remain resilient to diesel prices up to Rs 120–125 per litre,” the report noted.
The report added that advancements in fuel management technologies have improved operational efficiency and reduced dependence on load-based fuel consumption.
Profitability remains strongest in the Heavy Commercial Vehicle (HCV) segment, particularly in tippers, with potential margin expansion of 1–1.5 per cent driven by cost optimisation, localisation, and lighter vehicle platforms.
Meanwhile, Light Commercial Vehicles (LCVs) are expected to deliver steady growth, given their relatively lower cyclicality compared to heavier segments.
(With inputs from ANI)