India’s Proposed CAFE 3 Norms and the Auto Industry Split

CAFE 3 Norms Latest News

• India plans to implement the third phase of Corporate Average Fuel Efficiency (CAFE 3) norms from FY28–FY32 to improve fuel efficiency and reduce carbon emissions from passenger vehicles.
• However, the weight-based structure of the new norms has triggered significant disagreement within the auto industry, especially between manufacturers of small cars and those with a portfolio dominated by heavier SUVs.

Background

• What are CAFE norms?

• • CAFE norms regulate average fuel consumption and CO₂ emissions across a manufacturer’s fleet.
  • It proposes a movement from the current Modified Indian Driving Cycle (MIDC) to the Worldwide Harmonised Light Vehicles Test Procedure (WLTP), which the European Union adopted in 2018.
  • India follows a weight-based formula that becomes progressively stricter each year.
• CAFE 3: 
  • It  introduces a new weight-based efficiency formula – 0.002 × (W − 1170) + c.
  • Here W is the average fleet weight, 1,170kg is the fixed constant for weight, 0.002 is a fixed constant multiplier, and ‘c’ is a constant that changes every year. 
  • Since ‘c’ continues to decrease from FY28 to FY32, the rules will become stricter over time. 

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Why the Industry Is Divided

• Impact of the weight-based formula: 
  • Lighter cars face steeper efficiency improvements than heavier ones.
  • Example: A 740 kg car needs to become 48% more efficient by FY32. A 2,500 kg SUV needs only 25% improvement, despite higher absolute emissions.
  • Result: Greater regulatory burden on small, budget cars.
• Small-car manufacturers’ concerns:
  • Disproportionate impact: Small cars operate on low margins and cannot easily absorb the cost of: hybrid systems, electrification, lightweighting technologies.
  • Consumers may be priced out: Stricter norms may raise costs of entry-level cars. Could discourage first-time buyers and shrink the affordable car segment.
  • Distortion of CAFE’s original intent: Maruti Suzuki argues CAFE was meant to push big cars to improve fuel efficiency, not punish small cars.
• Why some carmakers support CAFE 3:
  • Tata Motors’ stance: Claims no concerns in achieving the norms. Rejects weight-based definitions of small cars as “Arbitrary”, potentially compromising safety standards.
  • Others (Mahindra, Tata): Oppose higher exemptions for lighter cars.

Comparison With Global Norms

• Relaxed standards for smaller cars in many countries like the US, China, Japan, and South Korea.
• Europe: Stricter norms overall, but smaller cars have relaxed CO₂ targets, while larger vehicles have tougher benchmarks.
• India’s system is the opposite, creating a regulatory imbalance.

Key Technical Issues

• “Brick in the Boot” concern:
  • Manufacturers may artificially increase weight to enter a more relaxed efficiency band.
  • May lead to production of bigger, heavier cars; reduced affordability; and increased emissions in absolute terms.
• Relaxation for small cars:
  • Debate on the 3 g CO₂/km relaxation for small cars with mass (≤ 909 kg), engine (≤ 1200 cc), length (≤ 4,000 mm).
  • Maruti and Renault want more relaxation.
  • Tata and Mahindra oppose increasing it.
• Shift to WLTP: WLTP gives more realistic fuel economy figures than MIDC. Some manufacturers (e.g., Mahindra) requested a delay due to compliance challenges.

Challenges

• Threat to small-car market: Rising costs may make entry-level cars unaffordable. Could worsen the market shift toward high-emission SUVs.
• Safety vs affordability trade-off: Weight-based relaxation may unintentionally encourage lighter designs at the cost of safety.
• Technological feasibility: Small cars have limited scope for expensive efficiency technologies.
• Potential loss of first-time buyers: A socially regressive outcome as small cars improve mobility for lower-income groups.
• Risk of regulatory distortion: The framework may not truly reduce total CO₂ emissions, only improve averages on paper.

Way Forward

• Review of weight-based approach: Consider aligning with global best practices—relaxing norms for lighter cars.
• Technology-neutral incentive structure: Encourage all low-carbon technologies – mild hybrids, strong hybrids, EVs, cleaner ICE improvements.
• Gradual phase-in of WLTP: Provide adequate transition time for manufacturers.
• Targeting real emission reduction: Shift toward absolute emissions caps instead of purely weight-based formulas.
• Policy support for small cars: Financial incentives or tax benefits to protect the budget segment.

Conclusion

• The proposed CAFE 3 norms mark a critical step in India’s low-carbon mobility transition.
• However, their weight-based structure disproportionately burdens small cars, risks market distortions, and may undermine affordability for first-time buyers—contrary to the objective of inclusive and sustainable mobility. 
• A balanced, evidence-based recalibration that ensures environmental integrity while protecting the small-car segment is essential for achieving India’s long-term climate and mobility goals.

Source: IE