CNG, EV penetration in Indian CV industry to touch 40-45% by FY30: ICRA

Alternative and cleaner fuel penetration in the Indian commercial vehicle (CV) industry is expected to grow to 40-45% by FY30, from 27% in FY26, claimed ICRA. The rating agency expects the penetration of CNG and LNG in the CV segment to increase to 30-35% by FY30, while electric vehicle penetration in this category is projected to grow to 10-15%. The study also expects this momentum will primarily be driven by the bus segment within the M&HCV category.

According to ICRA, incentives provided under the PM E-Drive Scheme have significantly reduced the procurement cost for electric vehicles, which will serve as a catalyst to accelerate the adoption of electric trucks going forward. It also stated that alternative fuel commercial vehicles, plying on CNG, LNG and electric powertrains, will sustain their consistently rising penetration across various sub-segments. The study further notes that penetration levels are expected to be higher in light commercial vehicles (LCVs) at 50-55%, vis-à-vis medium and heavy commercial vehicles (M&HCVs) at 25-30% by the end of FY30.

ICRA noted that CNG and LNG penetration in CVs in India has increased steadily to 25% in FY26 from 7% in FY21, emerging as a viable alternative to petrol and diesel. Adoption of EV and hybrid technologies, while remaining modest at 2% in FY26, is expected to gain momentum over the medium term, backed by government policies offering incentives, subsidies and tax waivers as well as due to an evolving EV ecosystem, which are likely to support affordability, going forward.

The share of diesel as a fuel for the CV industry in India has gradually declined to 67% in FY26 from 86% in FY21 owing to progressively stricter emission control norms and declining total cost of ownership (TCO) of alternative fuel technologies like CNG, LNG and electric propulsion systems, driven by regulatory support. Petrol adoption in CVs remained limited at less than 10% in the last fiscal, with usage largely confined to the light commercial vehicle (LCV) segment.

Various factors influencing adoption of alternative fuel tech

The pace of adoption of various alternative fuel technologies across CV sub-segments is also influenced by a wide range of factors such as torque requirements, payload, distance to be travelled and affordability by fleet operators. Diesel, CNG, and LNG account for the major part of vehicle sales in heavy-duty segments such as M&HCV (trucks) where long-haul operations and higher payload requirements remain key considerations for the buyers and operators, while LCVs (buses) have relatively higher penetration of petrol, CNG, and LNG.

Various government schemes and subsidies have been instrumental in driving electrification, particularly in the LCV (trucks) and M&HCV (buses). While the Central Government has introduced policies to support adoption of alternative fuel technologies, several state governments have also launched their own initiatives to complement this push. State-level policies currently remain largely EV-focused, with emphasis on demand incentives, infrastructure expansion and fleet electrification of state road transport undertakings.

While the domestic commercial vehicle manufacturers have been investing in new product developments across alternative fuel technologies, the general approach has been gradual, with limited quantum of investments in the past, in tandem with the slow pace of adoption seen so far for alternative fuels, said ICRA. With the gradual emergence of alternative fuel vehicles anticipated over the medium term, the OEMs may face the risk of stranded capacity of diesel powertrains, although the existing manufacturing facilities of diesel vehicles can be realigned to manufacture alternative fuel vehicles.

The costs associated with such realignment of manufacturing facilities generally remain moderate for a shift towards CNG, LNG platforms, and relatively higher for other platforms like electric vehicles, hydrogen internal combustion engines and hydrogen fuel cell vehicles. The agency also said that with the market evolving rapidly, new entrants in the electric buses and electric trucks segments are challenging the incumbents and thereby increasing the competition.

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