TL;DR
India is implementing stricter CAFE-III fuel economy norms for passenger vehicles starting April 2027, introducing a credit-trading mechanism to promote fuel efficiency and alternative fuels.
India's automotive industry is preparing for a new phase of Corporate Average Fuel Economy (CAFE-III) norms, set to take effect from April 2027 to March 2032. The Ministry of Power notified these stricter fuel-efficiency targets on September 29, reshaping automakers' technology investments and compliance costs for the next five years.
The new framework introduces a credit-debit mechanism, allowing manufacturers who exceed their fuel-efficiency targets to generate and trade credits with companies facing deficits. This policy aims to progressively improve fleet-wide fuel efficiency while offering additional compliance benefits for electric, hybrid, and alternative-fuel vehicles, as India's passenger vehicle market expands and environmental obligations grow.
