After years of tepid growth, India’s commercial vehicle sector is hitting the accelerator. Nomura says lower taxes, aging fleets, and surging freight rates are setting up a multi-year upcycle that’s just getting started
The rumble of heavy trucks hauling goods across India’s highways is about to get a lot louder. After several years of modest growth, the country’s medium and heavy commercial vehicle (MHCV) industry is poised for a powerful revival—and analysts at Nomura believe two companies are perfectly positioned to ride the wave.
“We expect the India MHCV industry, which has grown moderately in the past few years, to experience renewed momentum,” Nomura wrote in a recent research note that significantly upgraded growth forecasts for the sector. The firm now expects industry growth of 8% this fiscal year and 10% next year, up sharply from previous estimates of 4-5%.
What’s changed? A potent cocktail of favorable conditions is converging: freight rates are climbing, making truck operators highly profitable; recent GST cuts have made new vehicles more affordable; the average truck on Indian roads is pushing 10 years old—well past the typical seven-year replacement cycle; and looming regulatory changes are likely to trigger pre-buying waves before new, more expensive standards kick in.
The evidence is already showing up in sales data. In November alone, domestic MHCV growth surged 31% year-over-year—an early signal that the cycle is turning.
“We believe these are still early stages of the CV upcycle, and growth can be even stronger supported by ‘Goldilocks’ conditions for India and by strong global growth in 2026,” Nomura analysts wrote, suggesting the rally could have legs extending well beyond current forecasts.
The Freight Corridor That Wasn’t a Threat
One potential headwind that investors have worried about—the dedicated freight corridor (DFC) now 96% operational across Eastern and Western India—turns out to be much less concerning than feared.
While rail freight is indeed ramping up, Nomura notes that “non-bulk cargo (~30% of freight) continues to rely heavily on road freight.” The sheer scale and diversity of India’s logistics needs means trucks remain indispensable. There may be some shift in the types of trucks demanded—tractor-trailers that compete directly with rail bulk movement could see softer demand—but overall truck volumes should remain strong.
Ashok Leyland: The Pure-Play Beneficiary
Nomura’s pick in the sector is Ashok Leyland, which commands roughly 31% of India’s MHCV market. The firm has dramatically upgraded volume growth expectations to “~10%/10%/6% total MHCV volume growth in FY26F-28F” compared to previous forecasts of just 5-6% annually. Add in stronger exports, and total volumes could grow 10-11% over the next two years.
But volume growth is only part of the story. “Benign commodity prices, lower discounts and operating leverage should offer margin tailwinds as well,” Nomura wrote. The firm expects EBITDA margins to expand from current levels to 13.4% this year, then to 14.3% and 14.5% in subsequent years—driving an impressive 18% earnings growth rate through 2028.
Based on this outlook, Nomura raised its valuation multiple for Ashok Leyland to 13x EV/EBITDA from 12x previously, arriving at a target price of Rs 196. The stock “remains our preferred pick in the sector,” and crucially, “our EPS estimates for AL are well ahead of consensus by 19%/20% for 27F/28F”—suggesting the market hasn’t yet priced in the strength of the coming cycle, and presents potential if the firm’s thesis plays out.
Tata Motors CV: Gearing Up
Nomura’s coverage on Tata Motors Commercial Vehicles follows its recent demerger from the parent company with a Buy rating and target price of Rs 481—implying roughly 20% upside from current levels.
TMCV enters this upcycle from a position of dominance, holding “~46% market share in the domestic MHCV industry in FY25.” With nearly half the market, TMCV stands to capture the lion’s share of incremental growth as the cycle accelerates.
Nomura expects “healthy 10%/10%/5% y-y volume growth in FY26-28F, with EBITDA margins expanding to 12%-13% over FY26-28F”—roughly in line with Ashok Leyland’s trajectory but from a larger base given TMCV’s market leadership.
The complication—and potential opportunity—lies in TMCV’s recent acquisition of Iveco’s truck business for EUR 3.8 billion. That European operation is “passing through a downcycle and is likely to see growth recover from FY27F,” according to Nomura. The firm values this piece conservatively, assigning just 4x EV/EBIT “at the lower end of its peers’ average trading multiple of ~4-10x given its lower scale and margins profile.”
But here’s where it gets interesting: “Over the medium term, there could be potentially higher value accretion in Iveco given synergy benefits with TMCV’s India business across the supply chain, product development and new market opportunities.”
In other words, Nomura is valuing Iveco at distressed multiples today, but if management can successfully integrate operations and realize cost synergies, there’s hidden upside in the European business that isn’t reflected in the Rs 481 target price.
Both Ashok Leyland and Tata Motors CV offer leveraged plays on this thesis, with double-digit upside potential if Nomura’s forecasts prove accurate. The choice between them comes down to investor preference: Ashok Leyland as the purer domestic play with less complexity, or TMCV for market leadership plus the optionality of Iveco value creation.
What’s clear is that after years of waiting, India’s truck cycle is finally shifting into higher gear—and the early movers may have higher potential.
