India's commercial vehicle (CV) sector is recovering, while the industry is also moving towards electrification, greater localisation and technology-led manufacturing.

Stronger freight demand, improving vehicle affordability and replacement demand are supporting the conventional CV market, while electric trucks are being adopted in structured logistics applications.

An investment firm expects CV volumes to grow by 10-12% or more in FY27, with upside risks, and has a 'Buy' rating on Ashok Leyland and Tata Motors CV. Industry volumes have grown by more than 25% year to date, with medium and heavy commercial vehicles (M&HCVs) recording higher demand in August. The recovery is supported by improved financing conditions, an ageing fleet, increased infrastructure and private-sector capital expenditure, migration from used trucks to more efficient BS6 vehicles, high fleet utilisation, firm freight rates and lower running costs.

The investment firm believes the current cycle has a stronger foundation than previous upcycles because the freight ecosystem has become more organised, allowing operators to pass on cost inflation while maintaining profitability. It does not consider rail freight an imminent threat despite the expansion of dedicated freight corridors.

Tata Motors and Ashok Leyland are expected to retain broadly stable market shares, supported by their distribution and service networks, access to financing, brand equity and fleet relationships. New entrants continue to face difficulties in the M&HCV segment. Telematics could provide additional opportunities through predictive maintenance, insurance underwriting and product development. Near-term margins could face pressure from higher steel and rubber prices, although recent price increases of around 1-1.5% per quarter, pricing discipline and cost-reduction programmes are expected to limit the impact. Regulatory changes from October 2027, including ADAS and braking-system requirements, could add further costs. Despite concerns over crude prices and the wider economy, the investment firm believes the market is not fully reflecting the changes in fundamentals, with both Tata Motors CV and Ashok Leyland trading below 20x PE and at around 12x EV/EBITDA.

The government is also pursuing changes in the commercial vehicle sector. Tarun Kapoor, Advisor to the Prime Minister, said at the 66th Society of Indian Automobile Manufacturers annual convention that the next five years would be important and that incremental measures would not be sufficient. He called for faster electrification of trucks and buses to reduce diesel dependence and address energy security concerns amid India's reliance on imported crude.

Kapoor said the government would work with manufacturers and financiers on financing mechanisms, battery swapping and highway charging infrastructure. The PM E-DRIVE scheme currently provides for 5,000 electric trucks, but only around 150 have been covered so far. He also called for greater domestic manufacturing of semiconductors and other critical components, citing rare-earth magnet supply disruptions as evidence of vulnerabilities in concentrated global supply chains. India, he said, should seek to develop its automotive manufacturing, technology and export capabilities, with more R&D, design, component production and innovation taking place domestically. Restrictions, taxation measures and schemes encouraging the replacement of older commercial vehicles could also be considered.

Localisation of electric-truck technology faces challenges. The government has extended the deadline for domestic manufacturing of traction motors for electric buses and e-trucks under the PM E-DRIVE phased manufacturing programme from September 1st, 2026, to April 1st, 2027, because Indian companies have yet to secure licences from China to import rare-earth permanent magnets. The Ministry of Heavy Industries' latest amendment requires domestic production of traction motors, including magnet fitment, rotor and stator assembly, shaft, bearing, enclosure, connector and cable fitment. For N3 trucks, the requirement applies where the motor does not have an integrated transmission. The e-bus programme was originally notified in March 2025 and amended in September 2025 and March 2026, while the e-truck programme has undergone amendments since July 2025.

The commercial-vehicle transition is taking place around specific logistics networks. Amazon India has planned to scale approximately 1,000 Eicher electric trucks for Amazon Now, with around 50 already operating on 100-180km daily routes and using fast chargers that require about 50 minutes. The network is intended to support Amazon Now's expansion to 100 cities and more than 1,000 micro-fulfilment centres. Delhi-NCR, Bengaluru and Mumbai are among the initial locations, followed by Hyderabad, Chennai, Kolkata, Jaipur, Lucknow, Kochi, Mangalore and Vizag. Amazon has also deployed more than 12,500 electric vehicles across over 500 Indian cities.

Tata Motors has secured more than 3,400 electric CV orders, including around 900 trucks and nearly 500 buses. Its electric truck range spans 7.5 to 55 tons and includes the Ultra E.7, Ultra E.9, Ultra E.12, Prima E.28K, Prima E.28K 6x4 Tipper and Prima E.55S 4x2 Tractor. Another model under the Azura name is planned.

Delhi's proposed freight-transfer system could affect electric-truck adoption by establishing hubs at Sonipat, Faridabad, Ghaziabad, Greater Noida and Gurgaon. Diesel vehicles would transfer trailers or loads at the city's periphery to electric trucks for the final leg into Delhi, with the initial phase targeting nearly half of incoming long-haul freight. Proposed Urban Consolidation Centres, Weigh-in-Motion sensors and ANPR cameras would support enforcement. Restricting pre-BS VI trucks by 2027 could reduce PM2.5 emissions from interstate freight vehicles by 51%, while a complete shift to electric trucks could eliminate tailpipe PM2.5 emissions by 2035.

The 10th Truck Trailer and Tyre Show in Jaipur featured around 70-80 exhibitors displaying trailer manufacturing, axles, suspensions, braking systems, wheels, software and aftermarket technologies. Five Lasercut showcased a 6,200kg trailer and a lightweight box tipper around 1.1-1.2 tons lighter than conventional designs. It manufactures 125-150 trailers monthly and plans to double capacity to 250-300 units. Jamna Auto Industries displayed its in-house suspension and axle manufacturing capabilities, a new Pithampur facility and plans for nearly 200 additional customer touchpoints. RKFL displayed 13-17-ton axles and suspension systems, with in-house forging, casting, machining and fabrication.

Other exhibitors demonstrated high-load wheels, ABS and EBS braking systems, filtration, automated welding, bearings, suspension springs and digital fleet-management systems. EKA Mobility displayed a 55-ton 6x4 electric tractor, while Lozics showcased cloud-based transport and fleet-management software serving around 850 customers, including AI-powered tools under development.

These developments indicate that electric commercial-vehicle adoption is increasingly linked to route economics rather than maximum range. Fixed warehouse-to-warehouse routes, predictable schedules, high utilisation and dedicated charging infrastructure are among the early use cases. For fleet operators, sourcing teams and financiers, vehicle range, payload, uptime, maintenance and charging access must therefore be assessed alongside warehouse locations, loading schedules and route requirements.

The broader transition will depend on connecting vehicles with warehouses, charging points, freight-transfer hubs and digital systems. Domestic manufacturing of batteries, motors, magnets, semiconductors and other critical components will also be required to reduce supply-chain vulnerabilities. India's next phase of CV growth is expected to combine conventional demand with a gradual shift towards electric, connected, lightweight and increasingly localised commercial transportation.