A simmering rift within India’s automobile industry has intensified ahead of the rollout of the next phase of Corporate Average Fuel Efficiency (CAFÉ) norms, with carmakers sharply divided over whether small-car eligibility should be determined by vehicle weight or affordability.
Maruti Suzuki, Toyota, Honda and Renault — together holding 49 percent of the passenger vehicle market as of September 2025 — are backing a Bureau of Energy Efficiency (BEE) draft that proposes weight-based relaxation for smaller cars. But rivals, including Tata Motors, Hyundai, Mahindra & Mahindra and others have pushed back, arguing that linking compliance solely to weight could distort the market and disadvantage manufacturers who operate in adjacent segments.
A senior executive at a top-four carmaker said discussions within the Society of Indian Automobile Manufacturers (SIAM) remain stuck. “Few OEMs have not agreed to a consensus on small cars. Among the various proposals discussed within SIAM, one relates to the price of the car for qualifying for the norms,” the person said.
Another senior industry official said that if weight is being considered, then price cannot be ignored. “If weight can be considered, we have argued that affordability should also be a rightful consideration. The price gap between an average two-wheeler and the entry-level four-wheeler is 3.5–4x,” he said. Industry executives also point out that lightweight does not always mean low-cost — several sub-909 kg vehicles retail at close to ₹10 lakh.
Tata Motors has strongly opposed the weight-based categorisation. Speaking after the company’s September quarter results, Shailesh Chandra, MD and CEO of Tata Motors Passenger Vehicles, criticised the draft framework.
“There has been an effort to define an arbitrary category of small cars based on weight. We will not support this,” Chandra said. “We have absolutely no concerns in meeting the CAFÉ norms even with a high share of small cars, and we see no justification for special concessions.”
Tata Motors, India’s second-largest producer of small cars with over 85 percent of its sales coming from this segment, has argued that the proposed weight relaxation risks diluting safety standards. According to Chandra, no car below 909 kg meets the Bharat New Car Assessment Programme (BNCAP) safety rating, and encouraging lighter cars could undermine safety gains achieved over the past decade.
This has direct implications for market leader Maruti Suzuki, which has a large portfolio of sub-909 kg models — including the Wagon R, Celerio, Alto and even the Nexa-sold Ignis.
Chandra added that diluting emission norms based on weight criteria compromises safety and distracts from the broader transition toward sustainable mobility.
Currently, cars are classified for GST based on length and engine size, with sub-4-metre petrol vehicles under 1,200cc and diesels under 1,500cc taxed at 18 percent, while all others attract 40 percent.
The upcoming CAFÉ 3 norms, effective April 1, 2027, are significantly more stringent. The revised CO₂ emission target has been tightened to 88.4 gm/km, compared with the earlier expectation of 91.7 gm/km and well below the CAFÉ 2 target of 113 gm/km. Carmakers that miss their fleet-average targets will face steep penalties.
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