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The Government of India has notified the Corporate Average Fuel Economy (CAFE)-III norms for passenger vehicles. The new framework will apply from April 1, 2027, to March 31, 2032, covering M1 category passenger vehicles manufactured or imported for sale in India.
Under CAFE-III, automakers will have to maintain the average fuel consumption and CO2 emissions of their overall vehicle portfolio within specified limits. The targets will become progressively stricter each year. For a reference fleet weight of 1,229 kg, the fuel-consumption target will decline from 3.996 litres per 100 km in FY2028 to 3.3273 litres per 100 km in FY2032. This corresponds to around 94.8 grams of CO2 per km in FY2028 and 78.9 grams per km in FY2032.
The new framework provides the highest compliance benefit to electric vehicles. Battery Electric Vehicles (BEVs) and Range-Extended Electric Vehicles will receive a 3.0x volume derogation factor. Plug-in hybrids and flex-fuel strong hybrids will receive a 2.5x factor, strong hybrids a 1.6x factor, and flex-fuel ethanol vehicles a 1.1x factor. This means the effective sales volume of these vehicles will receive additional weightage in CAFE calculations.
CAFE-III also allows automakers to meet their targets through alternative fuels and other technologies. Vehicles running on E20 or higher notified ethanol-petrol blends will receive an 8% Carbon Neutrality Factor, while flex-fuel ethanol vehicles will receive a 22.3% factor. CNG vehicles will receive a 5% factor or the notified CBG blending percentage, whichever is higher.
The rules also provide compliance benefits through fuel-saving technologies. Automakers will additionally be allowed to earn and trade CAFE compliance credits under the prescribed mechanism. The framework gives manufacturers multiple options to manage the overall efficiency of their vehicle portfolios while meeting the prescribed targets.
Shailesh Chandra, MD & CEO, Tata Motors Passenger Vehicles Ltd., said, “The CAFE III framework is an important step in advancing India journey towards cleaner and more sustainable mobility. We welcome the Government consultative approach in developing a framework that combines ambitious fuel efficiency targets with market-based compliance mechanisms. Importantly, the continued recognition of zero-emission technologies reinforces the critical role of electrification in achieving India’s long-term decarbonisation objectives. The clarity and predictability provided by the framework will enable the industry to plan investments, accelerate innovation and offer customers an increasingly compelling range of cleaner mobility solutions. At Tata Motors, we remain committed to leading this transition through sustained investments in electric mobility and other technologies that can meaningfully reduce emissions.”
The final CAFE-III rules do not include the previously proposed additional benefit for certain small cars. However, manufacturers with annual eligible vehicle volumes of less than 1,000 units will be exempt from meeting the specific CAFE target. They will still be required to report their average fuel-consumption performance.
Overall, CAFE-III will require automakers to manage the fuel efficiency and emissions performance of their entire passenger vehicle portfolio. Along with providing the highest super credit to EVs, the new framework recognises hybrids, ethanol, CNG and other fuel-efficiency technologies as additional routes for manufacturers to meet the prescribed requirements.
