OPINION | CAFÉ Norms: A piece-wise linear approach may be worth a look to offset small car squeeze

Tighter corporate average fuel efficiency norms may penalise small cars.

In 1973, the Oxford-educated economist EF Schumacher published his trailblazing book, 'Small Is Beautiful'. The collection of essays, controversial at that time, drew vast interest and became highly influential, particularly for environmental issues.

More than half a century later, an intended policy to contain vehicular pollution in India has triggered fears of the opposite—small isn’t beautiful.

A Regulatory Paradox in the Making

There is an argument that proposed tighter emission norms under the corporate average fuel efficiency (CAFÉ) regulations would, ironically, end up penalising the more fuel-efficient small cars in an asymmetric math.

At the core of the issue is the weight-based linear formula which, despite its aim to reduce overall emissions, could end up inadvertently creating a disproportionate burden on lighter, more affordable vehicles.

The proposed CAFE 3 framework retains a weight-based linear formula that applies progressively steeper coefficients each year through FY32. But critics argue that there are design flaws in the linear formulaic approach.

This scenario presents a significant regulatory paradox. While larger, heavier SUVs are permitted higher CO₂ emissions targets (albeit with their own reduction demands), the already fuel-efficient small cars are required to achieve far greater percentage improvements. The concern is that CAFE 3, as drafted, could lead to India’s “SUV-ification”.

The Small Car Disadvantage

Under the September 2025 Bureau of Energy Efficiency (BEE) proposal, a 740 kg hatchback would need to improve efficiency by 48 per cent (from 97 to 51 g CO₂/km), while a 2,500 kg SUV would face only a 25 per cent improvement (from 180 to 135 g CO₂/km).

This disparity drew criticism. The latest BEE draft seeks to correct this by equalising the stringency at 36 per cent for both small and large cars.

While, on paper, this may seem to fix the flaw, there is also the question of scientific feasibility. Under the current draft, the CO₂ target for a 740 kg car would fall to 62 grams per kilometre—down from current global best levels of about 88 grams per kilometre.

In practice, this could effectively penalise relatively less expensive smaller cars that serve as the gateway to car ownership and as a visible symbol of upward mobility for India’s swelling middle class.

Since these entry-level cars already operate at relatively high efficiency, there is limited scope for further gains. Heavier, pricier SUVs, on the other hand, appear to have a comparatively easier path to compliance, as larger platforms can more readily absorb hybrid and electric powertrains without fundamentally altering price positioning.

How Global Standards Address the Extremes

In contrast to India’s proposed CAFE 3 framework — which applies a continuous linear formula across the entire weight spectrum — emission regulations in the United States, European Union, China, South Korea, and Japan incorporate carve-outs that flatten the efficiency curve at the extremes.

The U.S. CAFE standards, administered by National Highway Traffic Safety Administration (NHTSA), use a footprint-based target system where vehicles below a minimum footprint face a constant mpg target rather than an ever-steeper one, while very large vehicles hit a ceiling.

China’s Phase VI fuel consumption standards plateau below 1,090 kg and above 2,510 kg. Similarly, Korea’s standards flatten the CAFÉ target line below 1,110 kg, recognising that ultra-light vehicles and heavy luxury SUVs represent engineering extremes where strict linear scaling becomes counterproductive.

The European Union’s CO₂ regulation mandates a negative CAFE line slope—easier targets for small cars and tougher ones for heavier vehicles.

The rationale is grounded in thermodynamic and economic realities. By flattening the curve at both extremes, regulators create a “safe harbour” for the lightest and heaviest vehicles, concentrating the steepest improvement demands on the mid-weight segment (roughly 1,000–2,000 kg), where efficiency technologies deliver the best cost-benefit outcomes.

The Case for a Piece-Wise Linear Model

India’s CAFE 3 proposal, by contrast, offers no such relief. Its unbroken linear slope means that every kilogram of weight reduction in a small car translates into proportionally steeper CO₂ targets, while every kilogram of added weight makes compliance easier.

This risks incentivising manufacturers to upweight vehicles to secure milder emission targets—undermining CAFE’s core objective of reducing emissions.

India could draw lessons from global best practices, where countries like the United States, China, Korea, and Japan define a minimum floor and maximum ceiling through a piece-wise linear target-setting approach.

Beyond removing the inherent bias against smaller cars in a strictly linear system, a piece-wise linear framework would encourage innovation in powertrain efficiency, lightweight materials, and electrification across segments—rather than nudging automakers to add weight for regulatory advantage.

The final takeaway is clear: India must modernise its emission standards. A smarter, more inclusive path would adopt a piece-wise linear CAFE model that treats electrification and lightweighting as complementary, progressive incentives for decarbonisation.

(Views are personal, and do not represent the stand of this publication.)