India Plans Size-Based Fuel Norms Under CAFE III from 2027

The Indian government is considering linking fuel efficiency norms to vehicle size under the Corporate Average Fuel Economy (CAFE III) regulations, effective from April 2027. This shift aims to reduce emissions and align with India’s net-zero 2070 goal, impacting automakers and consumers.

The proposed CAFE III norms, set to replace CAFE II from April 2027, may categorize vehicles by size—small, medium, and large—rather than applying uniform CO2 emission targets. Current CAFE II norms require passenger vehicles to achieve 113 g/km of CO2 by 2025, with penalties of Rs 25,000 per g/km exceeded. The new approach addresses the 20% higher emissions of larger vehicles, like SUVs, which dominate 60% of India’s 4 million annual car sales.

Small cars (under 4 meters) may face stricter targets, around 100 g/km, while SUVs could have relaxed norms at 130 g/km, reflecting their heavier weight and power needs. This aims to balance compliance costs, which hit Rs 1,000 crore in penalties in 2024, per SIAM. India’s automotive sector, contributing 7% to GDP, must adapt to meet the 30% EV adoption goal by 2030, with hybrids and CNG vehicles bridging the transition.

Challenges include higher costs for small carmakers, like Maruti Suzuki, which holds 40% market share, as reengineering engines costs $500 million per model. Larger automakers, like Mahindra, benefit from SUV-focused portfolios but face EV transition costs, with 70% of investments in electrification. The norms align with global trends, like Europe’s 95 g/km target, but India’s 80% reliance on fossil fuel vehicles complicates compliance. Pilot projects in Delhi, with 10,000 CNG taxis, show a 15% emissions drop, offering a model.

Consumer impacts include a 5% price hike for non-compliant models, potentially reducing demand by 10%. The FAME III scheme, with $1 billion allocated, supports EV adoption, but only 12,000 charging stations exist nationwide. India’s 159.5 GW renewable capacity, including 108 GW solar, supports greener grids, but 20% curtailment limits EV charging reliability. The 2025 Budget’s $2 billion for clean mobility aims to address this, needing 100,000 stations by 2030.

Conclusion

India’s size-based CAFE III norms from 2027 aim to curb emissions, supporting net-zero goals. Balancing compliance costs and infrastructure development is key to ensuring industry and consumer readiness.

Source: Outlook Business,