Context
The Prime Minister’s Office recently reviewed the proposed CAFE-3 norms for passenger vehicles, expected to be implemented from FY 2028 to FY 2032. The proposal has led to disagreements within the automobile industry, particularly between small car manufacturers and SUV makers.
What are CAFE Norms?
- CAFE (Corporate Average Fuel Efficiency) norms regulate average fuel consumption and CO₂ emissions across a manufacturer’s entire fleet of passenger vehicles, not individual vehicles.
- The government fixes an average efficiency target that companies must meet based on total vehicles sold.
- Purpose: To reduce carbon emissions, improve fuel efficiency, lower fossil fuel consumption and help India meet climate commitments (under Paris Agreement).
- India is moving toward CAFE Phase 3 (CAFE-3) (FY 2028–2032) which proposes stricter emission limits and a transition from Modified Indian Driving Cycle (MIDC) toward Worldwide Harmonised Light Vehicles Test Procedure (WLTP) (used in the EU).
What is New in CAFE-3?
- India uses a weight-based formula to calculate efficiency targets.
- Key Feature: Heavier vehicles are allowed relatively higher emissions. Lighter vehicles face stricter efficiency targets.
- This means:
- Small cars → Higher improvement requirement
- Large SUVs → Relatively lower improvement requirement
- This has triggered debate over regulatory fairness.
Why is the Industry Divided?
- Concerns of Small Car Manufacturers (like Maruti Suzuki): Small cars operate on thin margins with hybrid and EV technologies being costly. The news norms can raise entry-level prices significantly which may discourage first time buyers, affecting lower-middle class consumers disproportionately.
- Position of SUV-Oriented Companies (like Tata Motors): They have expressed fewer concerns as they have a strong SUV portfolio and a greater EV transition readiness.
Challenges and Way Forward
| Challenges | Way Forward |
| 1. Disproportionate burden on small cars | Revisit or recalibrate the weight-based formula |
| 2. Risk of higher entry-level car prices | Provide transition incentives and fiscal support |
| 3. High technology costs (EV/Hybrid) | Promote domestic R&D and localisation |
| 4. Industry disagreement | Conduct structured stakeholder consultations |
| 5. Emission vs affordability trade-off | Balance climate targets with social equity considerations |
FAQs
Q1. What are CAFE (Corporate Average Fuel Efficiency) Norms?
CAFE (Corporate Average Fuel Efficiency) norms regulate the average fuel consumption and CO₂ emissions of a manufacturer’s entire fleet of passenger vehicles, not individual models.
Q2. Why are CAFE-3 Norms important?
They aim to reduce carbon emissions, improve fuel efficiency, lower fossil fuel use, and help India meet its Paris Agreement climate commitments.
Q3. What is new in CAFE-3?
India will adopt stricter emission limits and shift from the Modified Indian Driving Cycle (MIDC) to the Worldwide Harmonised Light Vehicles Test Procedure (WLTP), aligning with global standards.
Q4. Why is the automobile industry divided due to CAFE-3 Norms?
- Small car makers face higher compliance costs, risking affordability for entry-level buyers.
- SUV-focused companies are less affected due to weight-based allowances and stronger EV readiness.
Q5. What are the main challenges and way forward related to CAFE (Corporate Average Fuel Efficiency) Norms?
Challenges include disproportionate burden on small cars, rising prices, and high technology costs. The way forward involves recalibrating formulas, offering incentives, promoting domestic R&D, and balancing climate goals with affordability.
