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India To Drop Small-Car Fuel-Efficiency Concession Under CAFE-III Rules - No More Advantage Maruti?
The Indian Government has removed the proposed fuel-efficiency concession for small cars from its upcoming Corporate Average Fuel Efficiency (CAFE) III regulations, claims a new report by Reuters, tightening compliance requirements for all passenger vehicles irrespective of size.
An earlier CAFE-III draft framework had suggested relaxed targets for petrol cars weighing under 909kg and measuring less than four metres in length. The provision has now been excluded from the revised policy document reviewed by Reuters, aligning emission targets more uniformly across vehicle categories.
The new CAFE-III draft reviewed by Reuters indicates that average fleet emissions will need to be reduced from roughly 114g/km to about 100g/km by 2032. With credits applied, effective emissions could fall further if electric vehicle penetration increases meaningfully during the period. Failure to comply with the norms could attract penalties of up to $550 per vehicle, raising the financial stakes for automakers that do not meet targets.
Under the revised CAFE-III mechanism, manufacturers will be able to earn credits for selling electric vehicles and plug-in hybrids, which can be used to offset fleet fuel-consumption targets. Companies may also pool compliance performance with other automakers to meet overall regulatory thresholds.
The updated CAFE-III norms will apply from April 2027 for a five-year cycle. Authorities have revised the weight-based calculation structure to reduce over-compensation for lighter vehicles and ensure that fuel-efficiency standards are distributed more evenly across manufacturers' fleets.
Transport remains one of India's largest contributors to energy consumption and carbon emissions, with passenger vehicles accounting for nearly 90 per cent of transport-sector emissions. The tighter framework is aimed at accelerating efficiency improvements and encouraging electrification.
The move by the Indian government is expected to influence future product planning and powertrain strategy across India's passenger vehicle market, especially at the nation's largest carmaker, Maruti Suzuki, which has traditionally depended on its fleet of small, lightweight models to meet fuel efficiency and emissions averages.
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