India’s commercial vehicle industry could be on the cusp of a turnaround if two policy measures fall into place — a reduction in Goods and Services Tax (GST) and easier access to credit. For Shenu Agarwal, managing director and chief executive of Ashok Leyland, these changes would not just lift sentiment but also trigger a sharp revival in demand, reshaping the growth path for FY26 and FY27.
At present, commercial vehicles are taxed at 28 percent, among the highest rates in the GST structure. A cut to 18 percent, Agarwal told CNBC TV-18, would be a landmark shift. Lowering the tax burden would immediately reduce acquisition costs, encourage consumption, and ultimately generate more freight for the vehicles to carry.
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The other critical piece, he added, lies in financing. With more than 90 percent of CV purchases funded by loans, industry participants are watching for Reserve Bank of India measures that could ease credit flow to the sector. A combination of these two steps, Agarwal believes, would provide an instant boost to demand by addressing the twin hurdles of high upfront costs and tight financing.
Ashok Leyland’s own performance in the June quarter reflected resilience in a testing environment. The company expanded its market share across key categories, gaining 1.3 percent in the medium and heavy commercial vehicle segment, led by a 1.8 percent rise in trucks. The bus business, however, ceded ground as demand shifted towards fully built vehicles.
In the light commercial vehicle category, too, Ashok Leyland added 1.2 percent market share. Exports jumped 29 percent year-on-year, but despite the strong start, Agarwal has kept the FY26 growth target unchanged at 20–25 percent, pointing out that the company’s key overseas markets have remained insulated from global disruptions.
Looking to the second quarter, Agarwal expects support from a low base to lift performance. On the electric mobility front, he said operations at Switch India have been stabilised, putting the unit on course to turn PAT positive by the end of FY26 — a milestone in the group’s EV journey.
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The defence business, meanwhile, saw a year-on-year decline in the first quarter due to the execution of a large order in the same period last year, but the order book remains strong at around Rs 1,000 crore. Agarwal expects the vertical to deliver 25–30 percent topline growth this fiscal, backed by both fresh and repeat demand.
Following Q1, UBS reiterated a “buy” call on the stock with a target price of Rs 150, highlighting that the company delivered a margin beat on the back of operational discipline. The brokerage noted that medium and heavy commercial vehicle (MHCV) growth is expected in mid-single digits, while light commercial vehicle (LCV) growth could be slightly better.
At about 9:25 am, shares of the company were trading at Rs 128, lower by 3 percent as investors booked profit after a massive 7 percent rally in the previous session. Ashok Leyland shares are up 16 percent since the beginning of the year.
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