After a prolonged period of sluggish demand, weighed down by high ownership costs, stubborn inflation and an unfavorable interest rate environment, the commercial vehicle segment may finally be approaching a turning point in 2026. A combination of favorable factors, such as GST 2.0 and the government’s sustained push on infrastructure spending, is starting to lift morale across the sector, offering renewed optimism to manufacturers as well as investors.
December sales data underline this improving outlook. A-list actors including Ashok Leyland, Tata Enginesand Force Motors, reported year-over-year sales growth of up to 50% during the month. At the industry level, domestic shipments of commercial vehicles increased 26% year-on-year and 16% month-on-month, signaling a broad-based recovery in volumes and a strengthening demand environment. Investors have also been largely rewarded by the rally of these stocks, with Ashok Leyland gaining more than 60% in 2025, while Force engines has emerged as a remarkable player, generating returns of over 200% during the year.
The rise in sales has not gone unnoticed by analysts, who say the recent rebound could mark the early stages of a more sustained recovery in the sector. “Demand trends appear positive across all CV segments, with current demand dynamics likely remaining intact in the coming months, given positive sentiment and favorable leading indicators such as sustained demand for public and private infrastructure,” Motilal Oswal said in a report dated January 1.
Analysts at Axis Securities echo the same optimism. The brokerage expects high single-digit industrial growth for commercial vehicle players in FY26, largely supported by improving demand in the bus segment. To put things into perspective, Ashok Leyland reported a 44% year-on-year increase in M&HCV and bus sales in December.
Growing demand amid favorable leverage was also reflected in the good performance of tractor sector players. In December alone, volumes increased 36% year-on-year, supported by favorable monsoons and healthy reservoir levels. Mahindra & Mahindra lead the segment with a 37% year-on-year increase, followed by Escorts with a growth of 36% and VST tillers with an increase of 26%. Looking ahead to the second half, analysts expect the positive momentum to continue, helped by GST cuts, higher reservoir levels, strong rabi sowing and better kharif crop.
International brokerage firm BofA Securities said several structural factors are supporting the tractor segment beyond the benefit of a good monsoon and the boost in confidence resulting from the reduction in the GST rate. These include increasing crop diversification, leading to higher levels of agricultural mechanization, continued policy support, and the emergence of additional rural income sources such as ethanol blending, livestock breeding, and horticulture, complementing traditional agriculture.
For M&M, the world’s largest tractor maker by volume, HSBC analysts see strong positioning this year. “Its light commercial vehicle (LCV) business commands almost 50% market share in the LCV property sector and, in our opinion, is the most undervalued business,” the brokerage said.
It’s not just about experts; management also sees strong prospects for the coming quarters. For example, Girish Wagh, Managing Director and CEO, Tata Motors, said, “Tata Motors reported double-digit sales growth in Q3FY26, fueled by a strong rebound in construction and mining activity post prolonged monsoon, as well as sustained demand from key sectors and automotive logistics. Looking ahead, we expect demand to strengthen in Q4FY26 across most commercial vehicle segments. Key drivers in 2026 will include the government’s sustained infrastructure push and expansion into end-use sectors, both of which are expected to fuel positive momentum for the industry.
“The commercial vehicle sector continued its momentum in December across all segments, supported by favorable policy changes and favorable demand drivers. As the sector shows early signs of an upcycle, we expect further acceleration in the fourth quarter,” M&M management said while reporting its December sales.
The improving demand environment, supportive policy measures and encouraging comments from analysts and company executives suggest that the commercial vehicle cycle may be on the cusp of a recovery. Even if risks linked to macroeconomic volatility and cost pressures remain, the first indicators point to a strengthening of the dynamic by 2026.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. They do not represent the views of The Economic Times.)
