Budget to Support CV Demand, EV Adoption; Auto Sector Impact Neutral to Mildly Positive: ICRA

By Jony Shekhawat | Published Date : February 04, 2026

Higher infrastructure spending in Budget 2026–27 is expected to support demand for trucks, tippers and electric buses, while the overall impact on the auto sector remains neutral to mildly positive, according to ICRA.

Union Budget 2026–27 increases infrastructure spending to support commercial vehicles. ICRA said Budget 2026–27’s higher infrastructure spending will support demand for commercial vehicles. Electric bus procurement and EV policy support may help electric truck and bus adoption.

Infrastructure Spending to Boost Truck and Tipper Demand

Table of Contents

1. Infrastructure Spending to Boost Truck and Tipper Demand

2. FY27 Infrastructure Capex Increased to ₹12.2 Trillion

3. Multi-Axle Trucks and Tippers to Gain Most

4. Electric Bus Procurement to Support EV Adoption

5. Defence Orders and Rural Spending Add Stability

6. Auto Sector Impact Seen as Neutral to Mildly Positive

Read More: Eicher Pro X EV Completes Kashmir to Kanyakumari Trip

The Union Budget 2026–27 has increased focus on infrastructure spending, which is expected to support commercial vehicle demand. ICRA said the higher capital outlay will mainly benefit heavy-duty trucks, multi-axle trucks and tipper segments. These vehicles are closely linked to road construction, mining activity and public works projects.

FY27 Infrastructure Capex Increased to ₹12.2 Trillion

The government has increased infrastructure capital expenditure to ₹12.2 trillion for FY27, showing an 11.4% year-on-year growth. According to ICRA, this rise in spending should support freight movement and construction activity, which are key drivers for commercial vehicle volumes.

Higher infrastructure activity usually leads to better utilisation of truck fleets and supports replacement demand for older vehicles, especially in the medium and heavy commercial vehicle segments.

Multi-Axle Trucks and Tippers to Gain Most

ICRA said that the budget’s strong focus on infrastructure will mainly help multi-axle trucks and tippers. These vehicles are commonly used in mining work, road construction and big infrastructure projects across the country.

Kinjal Shah, Senior Vice President and Co-Group Head, Corporate Ratings at ICRA Limited, said that higher government spending on infrastructure is expected to improve demand for commercial vehicles, especially in the multi-axle truck and tipper categories.

This is positive for leading CV manufacturers, including Tata truck, Mahindra truck and Ashok Leyland truck.

Electric Bus Procurement to Support EV Adoption

The budget has proposed the procurement of 4,000 electric buses for Purvodaya tourism destinations. ICRA believes this move will support public electric mobility and improve capacity utilisation for electric bus makers.

Along with electric buses, long-term policy support may also help the adoption of electric truck solutions in urban transport and fleet operations. Continued funding under the PM E-Drive scheme is expected to support EV growth across vehicle segments.

Defence Orders and Rural Spending Add Stability

ICRA also noted that procurement of medium and heavy vehicles by the defence sector will help provide demand stability for CV manufacturers. This steady demand can support production planning and reduce market volatility.

At the same time, continued focus on rural infrastructure and farmer welfare schemes is expected to support rural income. This can indirectly help the demand for mini trucks, pickup trucks and entry-level commercial vehicles used for farm and local transport needs.

Auto Sector Impact Seen as Neutral to Mildly Positive

According to ICRA, the overall impact of Budget 2026–27 on the auto sector is neutral to mildly positive. Support for infrastructure, electrification, and manufacturing through higher PLI allocations is expected to improve long-term competitiveness.

ICRA also pointed out that better credit access through the TReDS platform may ease liquidity pressure for MSME auto component makers. While near-term challenges like urban demand slowdown and margin pressure remain, the budget provides demand visibility for key segments.

Also Read: Infrastructure Push Helps Mahindra Trucks and Buses Grow 40% in January

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Frequently Asked Questions on Commercial Vehicles

Q1. Which commercial vehicle segments will benefit most from Budget 2026–27?

Ans. Heavy-duty truck, multi-axle truck, tipper, bus and electric truck segments are expected to benefit due to higher infrastructure and public mobility spending.

Q2. How does infrastructure spending affect truck demand?

Ans. Road construction, mining and public works increase usage of trucks and tippers, leading to higher demand and better fleet utilisation.

Q3. Will electric buses and electric trucks see higher demand after the budget?

Ans. Yes, procurement of electric buses and continued EV policy support can improve the adoption of electric trucks and buses, especially in urban and government fleets.

Q4. How does the budget help small fleet owners and transporters?

Ans. Better roads, higher freight movement and stable demand can improve income for truck and mini truck operators over time.

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