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The upcoming CAFE 3 norms are creating divisions in the Indian auto industry due to the weight-based structure, which is supposed to create higher fuel efficiency targets for lighter and smaller cars than heavier cars. A section of the auto industry focusing on small passenger vehicles, including brands like Tata Motors, Hyundai, Mahindra, JSW MG Motor, has moved against the weight-based concession proposed in the upcoming fuel efficiency norms. These auto OEMs believe that the move will distort competition and hamper the transition to electric mobility in the country.
The above-mentioned auto OEMs believe that this norm will disproportionately burden manufacturers of budget cars, causing their vehicles to become unaffordable for many consumers as the cost of technologies like hybrid systems increases. However, auto makers focusing on larger vehicles are in a better position to meet less stringent targets and some resist special exemptions for smaller cars.
| CAFE 3 criteria at the root of disagreement | |
|---|---|
| Highlights of CAFE 3 Criteria | Tighter fuel economy targets, weight-based formula, relief for small petrol cars, incentives for cleaner vehicles, changes to WLTP |
| weight based formula | The proposed CAFE 3 criteria use a formula where smaller, lighter vehicles face the most significant improvements required for their fleet’s average carbon dioxide emissions. |
| impact on small car manufacturers | Increased costs, affordability concerns |
| Impact on big car manufacturers | Less stringent targets, opposition to relaxation |
What are the CAFE 3 criteria?
The CAFE 3 norms are a draft of the next phase of India’s corporate average fuel efficiency standards for passenger vehicles. It is expected to be in effect from 2027 to 2032. These criteria require automakers to reduce the average fuel consumption and carbon emissions of their fleets during this period, with targets becoming progressively tighter each year. The draft CAFE 3 norms also include relief for small petrol cars and incentives for electric and hybrid vehicles, and the test standard has been shifted to the more realistic WLTP.
Café 3: What’s the debate?
Two major players in the Indian passenger vehicle market, Tata Motors and Hyundai, want the government to scrap weight-based emissions concessions for small cars under planned new efficiency rules. These auto OEMs have written separate letters to the government saying that only one company will benefit from this rule. Despite no mention of the company, the hint is clearly pointing towards Maruti Suzuki, which is known for manufacturing ultra-light small cars and offering high fuel efficiency.
On the other hand, Maruti Suzuki, India’s largest carmaker in terms of production and sales volume, has been arguing that there were few provisions in their emission norms to protect very small cars in global car markets like Europe, the US, China, South Korea and Japan.
Café 3: The core of the disagreement
The limited scope for improving fuel efficiency is a major reason for disagreement. Under India’s existing CAFE norms, the permissible CO2 emissions amounts apply to all passenger cars weighing less than 3,500 kg. The new proposed rule aims to reduce average CO2 emissions to 91.7 g/km from the previous target of 113 g/km. The proposed rule claims to make it harder for small cars to meet the target than large SUVs, which would encourage companies to sell more EVs.
In its latest draft for the proposed CAFE 3 norms, the Indian government has proposed leniency for petrol cars with curb weight of 909 kg or less, length of less than 4,000 mm and engine capacity of 1,200 cc or less as they offer limited potential for efficiency improvements, which has created a sharp divide between leading carmakers focusing on making EVs and Maruti Suzuki, whose total sales are Rs. 16% comes from cars weighing less than 909 kg.
Reuters quoted officials from the three automakers as saying that the 909 kg limit is arbitrary and not in line with any global standards, alleging that the move will only benefit Maruti Suzuki.
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