CNG and LNG penetration in CV industry projected to reach 30-35% by FY30: ICRA

New Delhi: CNG and LNG penetration in the commercial vehicles (CV) industry in India is expected to increase to 30-35 per cent by 2029-30, up from 25 per cent in 2025-26, according to a report by rating agency ICRA. Overall alternative fuel penetration across commercial vehicles, covering CNG, LNG, and electric powertrains, is projected to touch 40-45 per cent by FY30, rising from 27 per cent in FY26.

The ICRA report noted that CNG and LNG adoption in commercial vehicles grew from 7 per cent in 2020-21 to 25 per cent in 2025-26, emerging as a practical alternative to conventional fuels. Electric vehicle penetration is expected to rise to 10-15 per cent by 2029-30, driven primarily by buses in the medium and heavy commercial vehicle category.

At the same time, diesel's share in the commercial vehicle market declined from 86 per cent in 2020-21 to 67 per cent in 2025-26 due to stricter emission rules and favourable total cost of ownership for alternative fuels. Petrol usage remained limited to less than 10 per cent in 2025-26, mostly within light commercial vehicles.

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Kinjal Shah, Senior Vice President and Co-Group Head at ICRA, said, "While the focus remains on increasing alternative fuel penetration, adoption in the Indian CV industry continues to face key challenges including high upfront vehicle costs and infrastructure gaps. TCO remains a key factor for fuel technology adoption in a cost-sensitive market like India."

At the sub-segment level, alternative fuel penetration is anticipated to reach 50-55 per cent in light commercial vehicles by FY30, compared to 25-30 per cent in medium and heavy commercial vehicles.

Operating economics vary across categories: total cost of ownership for 11-12 tonne electric trucks is 15-25 per cent lower than diesel or CNG trucks. For 55-tonne electric trucks, total cost of ownership is 10-15 per cent lower than diesel but 15-20 per cent higher than LNG trucks. Procurement incentives under the PM E-Drive Scheme continue to reduce upfront acquisition costs for electric trucks.

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"Domestic CV original equipment manufacturers (OEMs) are stepping up research and development investments across multiple fuel platforms to align their product portfolios with emerging alternative fuel technologies," Shah said.

"They are also focusing on modular vehicle architecture, which enables them to make more efficient transition across fuel technologies by standardising core components while integrating fuel-specific systems through interchangeable modules," Shah added.

Manufacturers face potential risks regarding stranded capacity for diesel powertrains as alternative fuels gain traction over the medium term. Existing facilities can be realigned, though transition costs remain moderate for CNG and LNG platforms and higher for electric, hydrogen internal combustion, and hydrogen fuel cell vehicles.

"The Indian CV industry is gearing up for transition towards alternative fuels with several external and internal factors at play," Shah noted. "While the industry growth in volumetric terms may remain largely unaffected with the said transition underway, the incremental rise is likely to be increasingly dominated by alternative fuels."