“CAFE III regulation lays down a structured road-map with aggressive annual targets for next 5-years for the auto industry along with a market-based compliance mechanism. This will not only ensure reduction of overall fuel consumption from new passenger vehicle fleet but also provide an opportunity to the industry to work on various technology pathways providing multiple choices to the consumers,”Shenu Agarwal President, Society of Indian Automobile Manufacturers (SIAM)
The Indian government has notified the third phase of Corporate Average Fuel Economy (CAFE-III) norms for passenger vehicles, setting relatively softer efficiency targets for lighter cars and requiring greater fuel-efficiency improvements from heavier vehicles.
The CAFE-III norms will provide a clear roadmap for improving fuel efficiency and reducing carbon emissions while offering manufacturers multiple technology pathways for compliance, the automobile industry said.
The new norms, which take effect from April 1, 2027, target a 16.7 per cent improvement in passenger vehicle fuel efficiency by 2032. The framework also recognises alternative fuels and cleaner technologies, including ethanol-blended petrol, biofuels, EVs, hybrids and flex-fuel vehicles.
Society of Indian Automobile Manufacturers (SIAM) President Shenu Agarwal(in pic) said the framework provides clear predictability which will enable the auto industry plan investments and accelerate innovation, thereby, playing an important role in the country’s journey towards Viksit Bharat in 2047.
“CAFE III regulation lays down a structured road-map with aggressive annual targets for next 5-years for the auto industry along with a market-based compliance mechanism. This will not only ensure reduction of overall fuel consumption from new passenger vehicle fleet but also provide an opportunity to the industry to work on various technology pathways providing multiple choices to the consumers,” he stated.
Car market leader Maruti Suzuki India’s Senior Executive Officer, Corporate Affairs, Rahul Bharti said the CAFE regulation was a central policy instrument for accelerating India’s decarbonisation and energy security journey in the mobility sector.
“It is a comprehensive regulation arrived at after scientific data calculations and detailed stakeholder and inter-ministerial consultation with ambitious targets for energy efficiency improvement and CO2 reduction. The regulation recognizes the contribution of multiple power-train technologies and fuels encouraging multi-faceted R&D and innovation. A credit/debit mechanism is an improvisation over the previous CAFE-II regulation,” he added.
Tata Motors Passenger Vehicles MD & CEO Shailesh Chandra(in pic) said the framework is an important step towards cleaner and more sustainable mobility.
“Importantly, the continued recognition of zero-emission technologies reinforces the critical role of electrification in achieving India’s long-term decarbonisation objectives,” he said.
Tarun Garg, MD & CEO, Hyundai Motor(in pic) India Limited termed the CAFE-III norms a positive step by the government towards advancing sustainable mobility in India.
“The provisions for credit trading, pooling and flexible compliance mechanisms offer manufacturers greater flexibility while promoting innovation, investment and competitiveness in India’s transition towards sustainable mobility,” he added.
Mahindra & Mahindra’s President – Automotive Business, Velusamy R, said the framework strikes a balance between environmental requirements and what is achievable for the industry, while strengthening India’s energy security.
“The targets are appropriately ambitious and provide a clear trajectory through 2031-32. We also welcome the inclusion of a compliance block, technology credits, cleaner-fuel benefits and super credits for EVs and other advanced technologies. This is a pragmatic, forward-looking framework and a double win for the environment and India’s energy security,” he stated.
Vikram Gulati, Country Head & Executive VP, Toyota Kirloskar Motor, said the CAFE 3 regulation takes due cognisance of the importance of various clean technologies using an objective and scientific based assessment methodology to arrive at a regulation that is best suited for our national interests.
“Therefore, aligning to multi pathway approach, battery electric vehicles, range extenders, plug-in hybrid vehicles, strong hybrid electric vehicles and flex fuel vehicles, including flex fuel strong hybrid vehicles have all been fairly recognised,” he observed.
Santosh Iyer, Managing Director and Chief Executive Officer of Mercedes-Benz India, sees the framework as a step in the right direction, combining ambitious targets with practical compliance flexibility.
“The strong recognition of battery electric vehicles and plug-in hybrid electric vehicles, coupled with long-term regulatory certainty, will accelerate the adoption of advanced ‘new energy vehicles’ and latest automotive technologies, which will strengthen India’s transition towards sustainable mobility,” he shared.
The CAFE-III norms will come into effect from April 1, 2027 and remain applicable up to March 31, 2032. They cover new passenger vehicles manufactured or imported for sale in India.
The norms seek over 16 per cent improvement in fuel efficiency over five years, with the fuel-consumption bench-mark tightening from 3.996 litres per 100 km in 2027-28 to 3.3273 litres per 100 km in 2031-32.
The framework provides manufacturers with multiple compliance pathways, including incentives for electric vehicles, hybrids, flex-fuel vehicles, alternative fuels and fuel-saving technologies. It also recognises renewable and low-carbon fuels through the Carbon Neutrality Factor.
Battery electric vehicles, range-extended electric vehicles, plug-in hybrid electric vehicles, strong hybrid electric vehicles and flex-fuel vehicles will receive volume derogation factors, or super credits, in fleet-average calculations.
Manufacturers may also meet their obligations over specified two-year or three-year compliance blocks, with credits generated by those performing better than prescribed targets eligible for carry-forward within the specified blocks.
Automobile makers with a compliance gap may use eligible carry-forward provisions, exchange or trade credits with other manufacturers, or purchase credits through the buy-out mechanism administered by the Bureau of Energy Efficiency.
The new norms also significantly expand the list of recognised fuel-conservation technologies from four to 12, while manufacturers with annual sales of less than 1,000 units will remain exempt from fleet-average obligations.
All India Distillers’ Association President Vijendra Singh said the framework could strengthen the link between India’s ethanol industry and clean mobility. He said the recognition of ethanol and flex-fuel vehicles through a 22.3 per cent Carbon Neutrality Factor and 1.1x super-credit provides greater policy visibility to biofuels.
“The focus now should be on building the wider FFV ecosystem, including vehicle availability, fuel infrastructure and consumer awareness,” Singh said, adding that this would be important for translating India’s ethanol capacity into greater clean mobility adoption.