Small car makers such as Maruti Suzuki and Renault are set to benefit from a softer set of fuel efficiency norms under the revised draft of the Corporate Average Fuel Efficiency (CAFE 3) rules, which significantly ease emission reduction requirements for entry-level vehicles.
The latest draft, circulated by the Bureau of Energy Efficiency (BEE) to industry stakeholders on Thursday, lowers the stringency of targets for lighter cars, a move that is expected to help keep costs in check in the price-sensitive small car segment.
Under the revised proposal, small cars weighing between 730 kg and 900 kg — including models such as the Renault Kwid and Maruti Alto — will face less demanding emission targets than those proposed earlier. For instance, the Alto, which weighs around 740 kg, would now need to meet an emission level of about 64 grams of COâ‚‚ per kilometre, compared with nearly 51 grams per kilometre in the earlier draft issued in September 2025.
For carmakers, the earlier targets would have required sharper investments in technology and potential price increases, a difficult proposition in a segment where margins are thin and buyers are highly cost-conscious. The revised norms ease that pressure, allowing companies to comply without significantly raising vehicle prices.
The changes follow multiple rounds of consultations, including meetings with the Prime Minister’s Office in February and March and a discussion chaired by the Cabinet secretary earlier this week. A further meeting with industry representatives and senior executives is scheduled for April 16 to finalise the framework.
Balancing the Scales
While easing norms for smaller vehicles, the draft tightens requirements for heavier cars, effectively shifting a larger share of emission cuts to bigger and more expensive models. Vehicles weighing between 1,800 kg and 2,200 kg will now have to meet steeper reduction targets, in the range of 10–12 grams of CO₂ per kilometre.
EV Equation
The draft also retains the existing incentive structure for electric vehicles, where manufacturers get additional credit for selling EVs when calculating their overall fleet emissions. Industry players, including the Society of Indian Automobile Manufacturers (Siam), have sought a higher incentive level, stating that it would help accelerate EV adoption, but no change has been made so far.
The recalibration reflects an attempt to balance environmental goals with market realities. Entry-level cars continue to account for a significant share of passenger vehicle sales and are often the first point of access to personal mobility for many buyers.
The final rules are expected to be notified after consultations, and the CAFE 3 norms are slated to come into force from April 1, 2027.
