Nomura Sees Commercial Vehicle Upcycle Taking Shape

India’s commercial vehicle (CV) industry may be at the early stages of a cyclical recovery, supported by improving freight economics, policy-led cost relief, and a rebuilding replacement cycle, according to a recent report by global brokerage Nomura. The firm believes the sector is positioned for an upturn over the next two to three years after an extended period of muted growth.

Nomura estimates that volumes in the medium and heavy commercial vehicle (M&HCV) segment could grow at an annual rate of 8 to 10 percent between FY26 and FY28. This projected growth marks what the brokerage describes as the beginning of the next upcycle for India’s commercial vehicle market, driven by a convergence of structural and cyclical factors.

One of the most significant drivers highlighted in the report is the improvement in fleet operator economics. Freight rates have shown signs of strengthening, while operating costs have remained relatively stable. This has resulted in better profitability for logistics operators, even though overall revenue growth has been moderate. According to Nomura, lower financing stress and improved cash flows have helped fleet owners stabilise balance sheets, creating a more favourable environment for new vehicle purchases.

Taxation-related policy changes have further supported affordability. Recent reductions in goods and services tax (GST) have lowered the upfront cost of truck acquisitions, easing monthly repayment burdens for buyers. Nomura noted that these changes have structurally improved return profiles for fleet operators, particularly in the medium and heavy truck segments, encouraging a gradual revival in purchase activity.

Another critical factor underpinning the recovery outlook is the ageing profile of India’s truck fleet. Nomura estimates that the average age of trucks operating on Indian roads is now close to 10 years, well above traditional replacement thresholds. As older vehicles become increasingly expensive to maintain and less fuel-efficient, replacement-led demand is expected to gain momentum over the medium term.

Regulatory developments could also influence near-term buying behaviour. Nomura pointed to upcoming safety and braking regulations scheduled for implementation over the next few years. These changes are likely to increase vehicle prices, potentially prompting pre-buying ahead of regulatory deadlines and providing a temporary lift to volumes.

In addition, the brokerage highlighted improving export trends and rising infrastructure spending as supportive factors. Demand in the light commercial vehicle segment has already shown improvement following GST cuts, while new model launches across multiple powertrains are expected to bolster market sentiment in the near term.

Overall, Nomura believes that stronger operating fundamentals, supportive policy measures, and an overdue replacement cycle have significantly improved visibility for a sustained recovery in India’s commercial vehicle sector. While the pace of the upturn may remain gradual, the underlying indicators suggest that the industry is moving into a more durable growth phase.