Ashok Leyland pins CV growth on GST, credit measures

India’s commercial vehicle (CV) market may be headed for a rebound if two key policy measures fall into place—a cut in Goods and Services Tax (GST) and better credit availability. Shenu Agarwal, managing director and CEO of Ashok Leyland, believes these changes could lift market sentiment and spark a sharp recovery in demand, shaping the growth trajectory for FY26 and FY27.

At present, CVs attract one of the steepest GST rates at 28 percent. Agarwal told CNBC-TV18 that reducing this to 18 percent would be a game-changer. Lowering the tax burden, he said, would immediately bring down acquisition costs, drive fresh purchases, and eventually translate into more freight movement across the country.

Financing, however, remains the other critical piece of the puzzle. With over 90 percent of CV purchases being loan-funded, the industry is closely watching for steps from the Reserve Bank of India to ease credit flow. Agarwal noted that a combination of tax relief and smoother financing would address the sector’s two biggest pain points—high upfront costs and limited funding—and deliver an immediate demand push.

Ashok Leyland’s performance in the June quarter reflected resilience despite a tough environment. The company expanded its market share in core categories, adding 1.3 percent in medium and heavy commercial vehicles, supported by a 1.8 percent rise in trucks. The bus segment, on the other hand, slipped as demand tilted towards fully built models.

The light commercial vehicle division also gained traction with a 1.2 percent market share increase, while exports climbed 29 percent year-on-year. Despite the upbeat momentum, Agarwal maintained the FY26 growth outlook at 20–25 percent, pointing out that the company’s overseas markets remain relatively shielded from global volatility.

Looking ahead, Agarwal expects the second quarter to benefit from a favourable base. On the EV front, he highlighted that Switch India’s operations are stabilising, setting the stage for the unit to turn profitable by the end of FY26—an important milestone in the group’s electric mobility journey.

The defence vertical recorded a year-on-year decline in Q1, largely due to the execution of a large order in the same quarter last year. Still, with an order book of around ₹1,000 crore, Agarwal expects the segment to deliver 25–30 percent revenue growth this fiscal, backed by repeat and fresh orders.

Following the results, UBS reiterated its “buy” rating on Ashok Leyland, setting a price target of ₹150. The brokerage highlighted stronger-than-expected margins, crediting disciplined cost management. It also forecast mid-single-digit growth for medium and heavy vehicles and slightly stronger numbers for the light commercial category.

As of 9:25 am, Ashok Leyland shares were trading at ₹128, down 3 percent as investors booked profits after a 7 percent rally in the previous session. Even so, the stock has gained 16 percent since the beginning of the year.