Nomura Highlights Growing Replacement Demand in Indian Commercial Vehicle Sector — Here’s What It Signals

The commercial vehicle (CV) industry in India — particularly the medium and heavy commercial vehicles (M&HCV) segment — is increasingly showing signs of a meaningful recovery after a period of sluggish growth. According to a recent report by global brokerage Nomura, replacement demand for commercial vehicles is emerging as a key structural driver for the sector, potentially ushering in the next upcycle and reshaping the CV market outlook India for 2026 and beyond.

What Nomura’s Report Says

Nomura’s analysis indicates that the M&HCV industry in India is entering a growth phase, with volumes expected to increase by roughly 8% in FY26 and 10% in FY27, following a period of modest performance. The report emphasises that several structural and macroeconomic factors are converging to support this rebound — most notably replacement demand.

The brokerage notes that the current expansion is still in the early stages of a CV upcycle, but that improving fundamentals are likely to sustain momentum. One of the most significant among these fundamentals is the high average age of trucks on Indian roads — estimated to be around 10 years — which sets the stage for a strong mhcv replacement cycle as operators seek newer, more efficient vehicles.

Why Replacement Demand Matters

Replacement demand has taken centre stage because many trucks in India’s fleet are aging. A fleet with an average age of around 10 years is older than what is typically considered optimal for operational efficiency and compliance with newer emissions and safety standards. As a result, many fleet owners are likely to prioritise replacing older vehicles rather than delaying purchases further, which can drive sustained sales growth.

This shift is significant for a few reasons:

• Modernisation of fleets: Newer vehicles typically offer better fuel efficiency, lower maintenance costs and improved uptime, making them more attractive to owners focused on long‑term profitability.
• Regulatory alignment: As emission norms tighten and scrappage incentives gain traction, operators are motivated to upgrade older assets, contributing to the truck fleet replacement cycle.
• Economic benefits: With freight rates improving and GST rationalisation enhancing affordability, fleet operators enjoy stronger cash flows, increasing confidence in investment decisions.

Broader Market Implications

Nomura’s report also highlights that this replacement‑led demand is supported by an improving macro environment and better fleet economics. Rising freight rates and cost efficiencies from GST reforms have helped improve profitability for fleet operators, enabling them to consider new purchases more seriously.

Another point the report underscores is that infrastructure improvements like the Dedicated Freight Corridor (DFC) — now largely operational — are not expected to significantly dampen demand for road freight. Non‑bulk cargo, which still constitutes a significant slice of the freight market, continues to rely heavily on trucking, preserving demand for commercial vehicles.

How the Upcycle Might Unfold

While the replacement wave is central to Nomura’s bullish outlook, the brokerage also notes that total industry volumes have not yet surpassed the pre‑pandemic peaks seen in FY19, indicating there is room for further growth. This upcycle, therefore, isn’t merely a bounce back to previous levels — it’s a structural recovery driven by fleet needs and market economics rather than short‑term cyclical factors.

Looking ahead, should India’s economic growth accelerate — backed by strong consumption and supportive fiscal policies — the industry could see even stronger growth beyond the 8–10% range projected for FY27.

What This Means for Stakeholders

For manufacturers, a growing replacement cycle presents a clear opportunity to ramp up production, introduce new models, and capture market share in an expanding environment. For fleet operators, this demand wave translates into decisions about timing purchases, upgrading to more efficient assets, and exploring financing options for fleet expansion. For investors and market analysts, the developing upcycle and replacement‑driven demand signify improving prospects for stocks linked to India’s commercial vehicle ecosystem.

Conclusion

Nomura’s focus on replacement demand for commercial vehicles signals that the Indian CV sector is shifting gears into a new growth phase. The combination of an ageing fleet, stronger freight economics, and macro support has laid the groundwork for a robust mhcv replacement cycle that could underpin the next upcycle in India’s commercial vehicle market. As demand visibility improves and structural drivers strengthen, the broader CV market outlook India looks increasingly resilient and optimistic for the years ahead.