MUMBAI, Apr 16: Domestic CV volumes are expected to touch 1 million units mark this fiscal, the pre-pandemic peak logged in FY19,  driven by accelerating infrastructure execution, replacement demand and policy support from the PM-eBus Sewa scheme, ratings agency Crisil said on Wednesday.

  The sector’s credit outlook remains stable, supported by strong liquidity and healthy cash flows, it said. The volume growth will be led by light commercial vehicles (LCVs), which are expected to account for around 62 per cent of total volume on account of rising penetration of e-commerce and warehousing.

A pickup in freight-intensive sectors such as cement and mining will boost the overall demand, it said.  Crisil said its analysis is based on four key CV players, which account for around 70 per cent of the sector volume.

The commercial vehicle (CV) sector comprises two segments– LCVs and M&HCV ( medium and heavy commercial vehicles)  — with buses classified under both the segments.

The M&HCV volume, comprising around 38 per cent of total volume, is expected to grow 2-4 per cent this fiscal, led by increased infrastructure spending across construction, roads and metro-rail projects, it said.

On the other hand,  the LCV segment may grow faster at 4-6 per cent driven by e-commerce-led deliveries and expansion of warehouses in Tier 2/3 cities.

It also said that easing inflation and interest rates will boost deferred replacement demand from the ageing fleet bought during FY 2017-2019, thereby supporting overall growth. In the electric bus segment, the PM-eBus Sewa scheme will catalyse demand, albeit on the current low base of  around 3,200 units, it added.

The PM-eBus Sewa scheme was launched in August 2023 with an estimated cost of Rs 57,613 crore, with an aim to deploy 10,000 electric buses across 100 cities.

“Domestic CV volume should grow 3-5 per cent this fiscal, rebounding from last fiscal’s slowdown and aligning with the sector’s long-term growth trend,” said Anuj Sethi, Senior Director at Crisil Ratings Ltd.

The recovery will be driven by a revival in infrastructure execution, an anchor for CV demand which gained momentum in the last quarter of fiscal 2025 and is likely to sustain on the back of a 10-11 per cent rise in central government capex, he noted.

A strong replacement cycle, expected to account for about a fifth of the volume, will further support demand, Sethi added.

The rating agency said that the regulatory changes will reshape the CV landscape this fiscal, with mandatory air-conditioned cabins in trucks coming into place from October this year, likely increasing costs by at least Rs 30,000 per unit, particularly for M&HCVs.

For the record, CV makers have already increased prices by 2-3 per cent in January to offset the rise in compliance costs, it added.

It further said that softening input costs should support an operating margin of 11-12 per cent  in line with the decadal high logged last fiscal.

While capital expenditure (capex) for regulatory upgrades and electric platform development will rise 12-15 per cent, strong cash flows will keep debt levels low and balance sheets healthy, according to Crisil.

“With regulatory costs rising, CV makers are likely to continue selective price hikes to protect margins at 11-12 per cent.

” Meanwhile, capex is set to rise, with leading players planning spends worth around Rs 4,500 crore this fiscal toward safety upgrades, emission compliance, and electric vehicle platforms,” said Poonam Upadhyay, Director at Crisil Ratings Ltd. (PTI)