TL;DR
India's proposed CAFE 3 norms, aimed at improving fuel efficiency, are causing a split in the auto industry due to their weight-based structure, which disproportionately impacts small car manufacturers.
India plans to introduce the third phase of Corporate Average Fuel Efficiency (CAFE 3) norms from FY28–FY32, aiming to significantly improve fuel efficiency and reduce carbon emissions from passenger vehicles. However, the proposed weight-based structure of these new norms has sparked considerable disagreement within the automotive industry, particularly between manufacturers of small cars and those predominantly producing heavier SUVs.
The core of the dispute lies in the formula's impact on different vehicle segments. Lighter cars are slated to face more stringent efficiency improvement targets compared to heavier vehicles. Small car manufacturers argue that this disproportionately affects them, as their vehicles operate on low margins and cannot easily absorb the costs associated with hybrid systems, electrification, or lightweighting technologies. This could lead to increased prices for entry-level cars, potentially pricing out first-time buyers and shrinking the affordable car segment.
Conversely, manufacturers of larger vehicles generally favor the weight-based relaxation, as it allows for more flexibility. The debate also extends to a proposed 3 g CO₂/km relaxation for small cars, which is a point of contention. The industry is also transitioning from the Modified Indian Driving Cycle (MIDC) to the Worldwide Harmonised Light Vehicles Test Procedure (WLTP), which provides more realistic fuel economy figures, adding another layer of complexity for compliance.
