India's auto industry seeks changes to draft CAFE-3 fuel efficiency norms

While Maruti Suzuki has supported the idea of concessions for small cars under the proposed CAFE 3 framework, Tata, Mahindra and Hyundai have expressed a different view.

India's automobile industry is seeking changes to the draft CAFE-3 fuel efficiency norms, calling for relaxed targets and higher incentives for electric vehicles (EVs), even as manufacturers remain divided over concessions for small cars. The outcome of these discussions could influence technology investments, vehicle mix and competitiveness over the next decade.

Automakers are concerned about the September draft of the corporate average fuel efficiency (CAFE) rules, which tighten efficiency targets, introduce annual improvement requirements, and revise incentive structures across EVs, hybrids and flex-fuel vehicles. The Society of Indian Automobile Manufacturers (SIAM) is expected to raise these issues with the Union heavy industries ministry, according to a report by Mint.

While stricter norms support emission reduction, carmakers argue that the pace and design of the targets could raise costs and disrupt product cycles. One key demand is higher 'super-credits' for zero-emission vehicles and a review of annual targets, which the industry says are operationally unviable.

The industry is split on proposed relaxations for small cars under 909kg and under four metres in length. These concessions would largely benefit Maruti Suzuki, whose portfolio is dominated by compact models. Other manufacturers have opposed special treatment, noting that the draft already proposes a relaxation of up to 9g CO₂/km for small cars in fleet calculations.

Another major concern is the revision of super-credit multipliers. The September draft proposes counting EVs as three units, down from four units suggested earlier by the Bureau of Energy Efficiency (BEE). Automakers argue this reduces incentives for EV adoption.

The draft also introduces annual fuel efficiency improvement targets, requiring a reduction in fuel consumption from 3.726 litres per 100km in 2027 to 3.013 litres by 2032. Industry executives say the targets are too steep and difficult to plan for, given technology and consumer adoption constraints.

CAFE-3 norms are set to take effect from April 2027 for five years, mandating fleet-wide emission reductions. Experts say the challenge lies in balancing ambition with market feasibility, especially as India's small-car segment continues to shrink sharply.