The Corporate Average Fuel Efficiency (CAFE) norms in India are nearing their finalization stage as the Power Ministry forwards new proposals to the Prime Minister’s Office (PMO). This pivotal moment follows extensive stakeholder discussions and sets the stage for the next phase of regulations aimed at reducing carbon emissions and enhancing fuel efficiency across automakers’ fleets.

Understanding CAFE Norms

Introduced in 2017, CAFE norms are mandatory standards regulating the average fuel consumption and CO2 emissions of a carmaker’s entire fleet of passenger vehicles, rather than focusing on individual models. The current Phase II, which commenced in 2022, targets a fleet-wide CO2 emission rate of approximately 113 g/km. The proposed Phase III aims to tighten these standards even further with a goal of 91.7 g/km by April 2027, a significant shift that could reshape the automotive landscape in India.

Key Changes Proposed in CAFE III

The latest proposals for CAFE III include:

• Reduction of fleet-wide CO2 emissions to 91.7 g/km.
• Adjustment of the slope value for vehicle weight from 0.002 to 0.00153, imposing stricter limits on heavier vehicles.
• Elimination of blanket derogations for small cars, with limited relief measures for vehicles under 909 kg and 1200 cc.

This new framework is expected to have a profound impact on manufacturers, particularly small car producers who dominate the affordable segment. The Society of Indian Automobile Manufacturers (SIAM) has expressed concerns that such stringent measures could lead to increased vehicle scrapping.

Impact on Electric Vehicles

One of the most contentious aspects of the proposed norms is the treatment of electric vehicles (EVs). Currently, EVs benefit from a zero-emission status; however, the new regulations may factor in grid emissions, primarily from coal-based sources. This change would effectively reduce the super credits earned from EV sales, which are vital for offsetting emissions from internal combustion engine (ICE) vehicles. As a result, manufacturers may face increased pressure to enhance EV efficiency and range to comply with the new standards.

Industry Dynamics and Future Outlook

Stakeholder dynamics are crucial as the PMO reviews the proposals. Heavy Industries Minister H.D. Kumaraswamy confirmed the forwarding of CAFE III to the PMO after consultations involving multiple ministries. OEMs like Maruti Suzuki have called for leniency for small cars, while the Bureau of Energy Efficiency (BEE) remains firm on compliance metrics. The final norms will significantly influence investments in hybrid technologies and EV development, reflecting the industry’s commitment to sustainable practices.

As the deadline for rollout approaches, the automotive sector must brace for substantial shifts in policy that could redefine operational strategies and product offerings.