India’s automakers are now confronted with a pressing issue-the introduction of stricter carbon emissions norms. These regulations, which demand a 30% reduction in emissions within a mere three years, are a direct result of the new CAFE standards that are driving the push for more fuel-efficient vehicles.
The third iteration of the Corporate Average Fuel Efficiency (CAFE) norms, proposed by the Bureau of Energy Efficiency (BEE), is set to significantly impact the automotive industry in India. Auto manufacturers are now under pressure to reduce carbon emissions by a third over the next three years or face severe penalties. These new regulations, effective from April 2027, are designed to enhance energy efficiency and reduce environmental impact, but they also pose significant challenges for the auto industry.
CAFE 3 norms set a target of 91.7 grams of CO2 per kilometre, while the subsequent CAFE 4 norms aim for a stricter limit of 70 grams of CO2 per kilometre. This transition period to CAFE 4 norms extends over five years, giving automakers additional time to adapt. The extension reflects the government’s understanding of the industry’s concerns and commitment to facilitating a smooth transition.
However, the transition to these stringent norms is not without its challenges. The industry has already seen a 30% increase in prices since the adoption of the Bharat Stage VI emission norms in April 2020. Automakers are now tasked with a delicate balancing act-developing low-emission vehicles while ensuring they are priced affordably to attract buyers.
CAFE norms apply to a company’s entire vehicle production and limit the carbon emissions from the total number of vehicles sold in a financial year. Non-compliance incurs significant penalties designed to compel manufacturers to produce more fuel-efficient cars. If a carmaker’s average fuel efficiency exceeds 0.2 litres per 100 kilometres, the penalty is ₹25,000 per vehicle. If it exceeds this threshold by more than 0.2 litres per 100 kilometres, the penalty doubles to ₹50,000 per vehicle.
As one industry executive points out, the success of this endeavour is crucial, as a low-emission vehicle that is not priced affordably will have no takers and will negatively impact the company’s CAFE score.
The BEE has requested industry stakeholders to submit their comments by the first week of July. After reviewing these representations, the agency will finalise the guidelines. The new CAFE norms employ the World Harmonised Light Vehicles Testing Procedure (WLTP) for measuring emissions, a method that provides more stringent readings than the Modified Indian Drive Cycle (MIDC).
Despite the extension to CAFE 4 norms, industry executives expressed concerns about the feasibility of meeting these ambitious targets.
A senior executive states that the government has agreed to extend the transition to CAFE 4 to five years, the targets outlined are tough. Not only would carmakers have to reduce carbon emissions and fuel consumption for the entire fleet in the next three years, but these parameters will also be measured per WLTP.
