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New CAFE-3 Fuel Norms: Lighter Cars Get Break, Heavier Face Pressure
1 Oct
Summary
- CAFE-3 norms apply from April 1, 2027, to March 31, 2032.
- Lighter vehicle portfolios gain more compliance room under new rules.
- Electric vehicles receive a 3x volume factor, though reduced from proposals.
India has finalized its third phase of Corporate Average Fuel Economy (CAFE-3) norms for passenger vehicles, set to take effect from April 1, 2027. These regulations will remain in place until March 31, 2032. The revised weight-based formula offers more flexibility for lighter vehicle portfolios while increasing compliance challenges for heavier ones. Notably, a proposed special concession for small petrol cars has been omitted.
The CAFE-3 framework introduces significant incentives for greener technologies. Battery electric and range-extended electric vehicles will benefit from a 3x volume factor. Plug-in hybrids and flex-fuel strong hybrids receive a 2.5x factor, and strong hybrids a 1.6x factor. Conventional vehicles can also gain benefits from twelve fuel-saving technologies, capped at 9 g CO₂/km.
Automakers will manage compliance through a credit-debit passbook system, allowing trading of credits. The buy-out price for deficits will increase from Rs 2,500 per gram of CO₂/km in FY28 to Rs 4,500 by FY32. The industry has welcomed the predictable roadmap, though some experts view it as a missed opportunity for prioritizing EVs more aggressively.
