India’s commercial vehicle boom is back—and Ashok Leyland stands to gain most

After six weak quarters–from April 2024 to July 2025–and negative growth in FY25, the CV upcycle is gaining pace, driven by regulatory reforms, improving macro indicators. A GST cut from 28% to 18% on trucks, tyres, lubricants, and spare parts is also expected to boost small transporter profits by 30–50%, according to InCred Equities.

Truck freight rates have also surged in double digits since April 2025, while lower operating costs are improving fleet utilization and profitability.

These structural changes improve fleet economics and reduce vehicle payback periods by 4-6 months. With the average fleet age around 10 years, a long-awaited replacement cycle is emerging as a key demand driver. Nuvama estimates such medium and heavy commercial vehicle (MHCV) upcycles can last up to six years, based on historical trends.

Industry volumes are projected to accelerate before stabilizing—InCred forecasts 10% growth in FY26, 16% in FY27 (surpassing the FY19 peak), and 7% in FY28 as the cycle matures.

Operating recovery reflected in performance

Ashok Leyland, the second-largest CV player by volume with 19% market share, is reaping the benefits. In the MHCV segment, it holds 31% share, while in light commercial vehicles (LCVs) it ranks third with 11%, behind Tata Motors and M&M, as per FY25 data.

Standalone revenue rose 9.3% year-on-year to ₹9,588 crore in Q2FY26 (July-September), driven by volume growth across key segments. Non-CV businesses are also expanding: aftermarket services grew 11%, power solutions 14%, and defence 25%. These non-truck segments now contribute roughly 50% of consolidated revenue, boosting margins and insulating the company from cyclical CV volatility.

Ebitda jumped 14.3% to ₹1,162 crore during the September-ended quarter, with margins expanding 50 bps to 12.1%, aided by cost optimization and higher non-truck growth. Profit before tax and exceptional items rose 23.2% to ₹1,083 crore during the same period. Net debt turned into a ₹1,000 crore net cash position from ₹500 crore in H1FY25.

Volumes confirm recovery is broadening

Volume data confirms the recovery. The MHCV industry grew 4% during Q2, followed by 7% growth in October 2025. Ashok Leyland sold 21,647 trucks and 4,660 buses domestically in Q2FY26, while LCV volumes rose 6.4% to 17,697 units—outperforming the industry.

Its popular Saathi model now accounts for 22-25% of total LCV volumes. Growth was even stronger in the 2-4 tonne category, which rose 13% in Q2 and 15% in October, aided by the GST rate cut. This lowered acquisition costs by around 10%, making new trucks and buses more affordable. The company also gained market share during H1FY26, increasing MHCV share by 50 bps to 31% and LCV share by 90 bps to 13.2%. Exports surged 45% year-on-year to 4,784 units in Q2, driven by GCC, African, and SAARC demand.

Ashok Leyland targets 18,000 exports in FY26, up from 15,000 in FY25, with a three-year goal of 25,000 units. ASEAN is the next key growth geography following recent market entry.

Strengthening CV cycle momentum

The recovery is expected to strengthen further in H2FY26, as broad-based consumption recovers and infrastructure spending continues. December 2025 sales rose 27% year-on-year to 21,533 units, following a 29% increase in November.

Beyond infrastructure demand, replacement cycles are emerging as a structural driver. With the average truck age estimated at 9.5-10.5 years, fleet operators are upgrading older BS-2, BS-3, and BS-4 trucks to more fuel-efficient BS-6 models, offering better power and turnaround times.

Ashok Leyland is capitalizing on this upcycle with new heavy-duty trucks (320–360 HP) and high-capacity buses launching in Q3-Q4. These support premiumization, higher realizations, and mid-teen Ebitda margin targets. Management expects the LCV segment to outperform MHCVs due to its retail-heavy profile, where lower upfront prices from GST cuts quickly drive demand.

The company continues to strengthen its bus business, where market share has remained stable at 33-34%. It plans to launch 13.5- and 15-metre high-sleeper buses, and is expanding body-building capacity from 12,000 to over 20,000 units per annum, improving scalability and profitability. Exports remain a medium-term growth lever.

EVs shift from optionality to earnings visibility

Alongside core CV recovery, Ashok Leyland is expanding its electric, CNG, LNG, and hydrogen portfolio. A bi-fuel LCV (CNG + petrol/diesel) is expected in the next 1-2 quarters to lower operating costs and ease adoption. The company has also entered battery manufacturing to strengthen control over the EV value chain.

Switch Mobility, the group’s EV subsidiary, is moving from development to commercial viability. It sold around 600 electric buses and 600 e-LCVs in H1FY26, achieving Ebitda and PAT profitability. Following FY25 Ebitda breakeven, management aims for free cash flow positivity by FY27, supported by an electric bus order book of 1,650 units at the end of Q2FY26.

Upcoming launches include a 9-metre standard/low-floor bus, additional e-LCV platforms in FY27, and a sub-9 metre bus expected in late FY27 or early FY28.

Its Electric Mobility as a Service (eMaaS) business is also scaling steadily, operating more than 1,100 electric buses in Q2FY26 with 98% availability and adding 250 buses in the quarter. The fleet is expected to have over 2,500 buses over the next 12 months, with all projects delivering double-digit IRRs.

Upcycle momentum meets a higher valuation bar

Beyond the CV upcycle, the Hinduja Leyland Finance listing is progressing, expected by Q1FY27, potentially unlocking value and improving capital allocation. With a 48% return in the last six months, at ₹185 per share, Ashok Leyland trades at a P/E of 32x, a premium to Tata Motors and above its five-year median.

For more such analysis, read Profit Pulse.

While the CV cycle is still in its early innings, broadening replacement demand and infrastructure-led growth, combined with multiple levers across LCVs, buses, exports, and EVs, position Ashok Leyland for sustained outperformance.

Nonetheless, the industry’s cyclical nature poses downside risk once the cycle peaks or growth softens earlier than expected.

Madhvendra has over seven years of experience in equity markets and writes detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments.

The writer does not hold the stocks discussed in this article.

The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.