Key highlights
- New CAFE-3 norms will apply from April 1, 2027 to March 31, 2032
- Battery EVs will get a 3x volume credit while hybrids and flex-fuel vehicles receive lower multipliers
- The proposed special concession for petrol cars weighing up to 909kg has been dropped
The government has notified India’s third phase of Corporate Average Fuel Economy (CAFE-3) norms, setting out how passenger vehicle manufacturers will have to manage fleet-wide fuel consumption and CO2 emissions over the next five years. The rules cover M1-category passenger vehicles manufactured or imported for sale in India.
Unlike rules focused on individual models, CAFE-3 evaluates a manufacturer’s overall fleet average. The calculation uses the Modified Indian Driving Cycle (MIDC), with vehicle weight playing a key role. The baseline unladen mass has been set at 1,229kg.
EVs get a significant compliance advantage
One of the biggest changes is the volume credit assigned to different powertrain technologies. A battery electric vehicle counts as three vehicles when calculating a manufacturer’s fleet average.
Plug-in hybrids and strong hybrids running on flex fuel get a 2.5x factor, strong hybrids receive 1.6x, while flex-fuel vehicles get a 1.1x factor. This effectively gives manufacturers greater compliance leverage as they add electrified and alternative-fuel models to their portfolios.
CAFE-3 also provides CO2 discounts for certain fuel technologies. E20 and above petrol blends receive an 8% discount, while flex-fuel vehicles receive a 22.3% discount. CNG vehicles get a 5% discount or the actual CBG blending percentage, whichever is higher.
No separate benefit for small cars
A separate concession proposed earlier for petrol cars weighing up to 909kg has been removed from the final framework. The earlier proposal would have provided a 3g/km CO2 benefit for this category.
However, lighter vehicles are still treated differently through the weight-based CAFE calculation. The final framework therefore does not eliminate the role of vehicle weight, but does away with a dedicated small-car carve-out.
Technology credits and compliance trading
Manufacturers can also claim up to 1g/km relief for 12 eligible fuel-saving technologies, with total relief capped at 9g/km. These include start-stop systems, TPMS, regenerative braking and 48V mild-hybrid systems.
A credit-trading mechanism with the Bureau of Energy Efficiency will also allow manufacturers to offset compliance deficits. The notified trading price rises from Rs 2,500 per g/km in FY2028 to Rs 4,500 in FY2032.
Also read: Volkswagen ID. Tiguan electric SUV to debut in October
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