CV upcycle just starting
The commercial vehicle (CV) business cycle appears to be turning, with momentum expected to build after a prolonged downcycle that played out over six quarters between April 2024 and July 2025. The Goods and Services Tax (GST) rate cut in September 2025 has significantly improved business economics for small transporters, triggering a revival in new truck demand.
Savings from lower costs of tyres, lubricants and spare parts are expected to improve cash flows for small truck operators. Meanwhile, a reduction in vehicle prices should shorten payback periods, as these benefits are likely to be retained under the reverse charge mechanism of the GST regime. In addition, medium-term drivers such as easing interest rates and an improving Index of Industrial Production (IIP) are expected to sustain the demand recovery through FY28.
Strong brand pull
Tata Motors is seen as better positioned to benefit from the recovery and potentially reverse its recent market share losses in the CV segment. Market share erosion during the downturn was more pronounced in trucks below 16 tonnes. However, with the demand revival likely to be led by small transporters and focused on small and medium trucks, Tata Motors’ wide product portfolio and strong brand recall offer a meaningful opportunity to regain lost share as the cycle turns.
Sustained profitability
A healthier demand environment is likely to result in lower discounts across the industry, supporting margin sustainability, the brokerage said in a note dated January 5.
“Tata Motors’ EBITDA margin is marginally lower than that of Ashok Leyland, which we believe is due to its small-truck-heavy product mix. The company has demonstrated superior RoCE and RoE versus key peers, driven by operating leverage from improved volumes, disciplined capital allocation and a structurally stronger balance sheet,” the note said.
Robust outlook
Analysts expect the CV industry to close FY26F with around 10% volume growth. While growth in the first half of FY26 remained modest at 4%, volumes are likely to accelerate in the second half and strengthen further to about 16% growth in FY27F, driven primarily by rising replacement demand. Growth is expected to moderate thereafter in FY28F.Tata Motors’ CV volumes grew 3% year-on-year in the first half of FY26, marginally below industry growth. However, as demand improves, the company is expected to outperform the broader industry, supported by its installed capacity of around 900,000 units per annum. Over FY26F–FY28F, Tata Motors’ CV volumes are projected to grow at a 12% CAGR, compared with about 11% growth for the overall CV industry.
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