Small carmakers are set to face a sharp regulatory squeeze under the proposed third phase of Corporate Average Fuel Economy (CAFE-3) norms, as the Bureau of Energy Efficiency (BEE) plans a uniform 36% cut in fleet-average CO₂ emissions by the fifth year, irrespective of the car weight. The BEE has also removed the earlier 3 g/km relaxation for small cars, meaning small-car leaders like Maruti Suzuki will face the hardest hit.
The BEE’s draft, scheduled for submission to the PMO on Monday, goes against SIAM’s submission which showed easing targets for lighter vehicles. Society of Indian Automobile Manufacturers (SIAM) has highlighted global practices where cars below a certain weight are subject to flatter emission targets.
Weight Imbalance
However, the BEE’s current proposal does not flatten the curve below a certain weight threshold. Calculation based on BEE methodology shows that a car like the Alto, which weighs just 735 kg, would need to reduce emissions from 96 g/km today to 62 g/km by FY32 to comply. By contrast, heavier SUVs such as the MG Gloster, weighing 2,500 kg, would need to cut emissions from 180 g/km to 116 g/km.
While the percentage reduction is identical, the absolute targets place far greater pressure on small car players as it is physically and technologically impossible to reduce emissions indefinitely. Just as humans cannot completely stop emitting CO₂ while breathing, cars will always produce a baseline level of emissions. Sector experts warn this could shift industry focus toward heavier vehicles, sidelining compact cars and reshaping the country’s mobility landscape.
In December, Rahul Bharti, Senior Executive Officer (Corporate Affairs) at Maruti Suzuki India (MSIL), warned that manufacturers of entry-level models could be forced to discontinue them without the government introducing weight-based relief for small cars. He emphasized that such protective floors are standard “global practice.”
In countries like China, tightening stops for vehicles below 1,090 kg; in Korea, it flattens at 1,110 kg; and in the United States, entry vehicles under a 41 sq ft footprint are effectively protected. In these markets, once a minimum threshold is reached, the emission target stops tightening, creating a protective floor for small cars. These global precedents were submitted by SIAM to the MoHI and BEE on 3 December 2025.
Stopping tightening at a certain weight means that all vehicles below that threshold are assigned a fixed emission target throughout the CAFE period.
Under weight-based flattening, a car like the Alto, which weighs only 735 kg, would be treated as 1,090 kg (China’s reference), meaning its target would have been 73 g/km instead of 62 g/km. This weight-based flattening curve mechanism was introduced because small cars are inherently efficient as they consume less fuel, occupy less space, and produce lower emissions in both manufacturing and operation. They are also crucial for first-time buyers transitioning from two-wheelers to cars, making them essential for affordable and accessible mobility.
Global Precedents
According to Maruti, even the Fiat 500—one of the world’s most fuel-efficient small cars—emits about 88.5 g/km of CO₂, comparable to the Alto, yet would still fall nearly 30% short of India’s prescribed target under the current framework. Industry experts warn that penalizing small cars with unrealistic targets could push consumers toward larger vehicles, which can more easily absorb regulatory costs. This could delay the critical transition from two-wheelers to cars, leaving more people exposed to traffic accidents. With India having only about 33 cars per 1,000 people, the risk to road safety remains high.
