The debate over India’s upcoming CAFE-3 (Corporate Average Fuel Efficiency) norms is intensifying, with the Society of Indian Automobile Manufacturers (SIAM) warning that the proposed regulations could create significant stress for the industry. While automakers remain divided on whether small cars should receive more lenient emission caps compared to larger vehicles, several other industry concerns have gone largely unnoticed.
The Bureau of Energy Efficiency (BEE) issued a revised draft of the CAFE-3 norms in September 2025, updating the earlier 2024 proposal. Key changes include:
- Assigning a 29g CO₂ tailpipe emission rating for battery electric vehicles instead of zero.
- Reducing ‘super credits’ for EVs and certain other vehicle categories.
- Setting a steep average fleet-wide emission target of 71.5g CO₂ by 2032.
SIAM has formally opposed all three proposals, noting mixed industry views on allowing a modest 3g relaxation in CO₂ limits for small cars. The norms are set to take effect in 2027–28 and will remain applicable for a five-year period, marking a pivotal moment for India’s automotive and EV landscape.
However, SIAM has not highlighted any differing views among its members on other concerns. Regarding battery electric vehicle (BEV) emissions, SIAM has argued that their tailpipe emissions should be considered zero, stating this aligns with existing CAFE norms and is necessary for India’s EV adoption.
A senior government official, speaking on condition of anonymity, clarified that the electricity used to charge BEVs is generated from at least 30% non-renewable sources, resulting in an effective tailpipe emission assessment of 29 grams of CO₂. “This calculation accounts for emissions from the production of electricity used to charge BEV batteries. We will follow the approach proposed by the Ministry of Power,” the official added.
The second proposal drawing SIAM’s criticism is the annual fleet compliance target of 71.5 grams CO₂ by 2032. SIAM has argued that achieving this would require a 63% reduction from current CAFE-2 levels, an unprecedented global benchmark. The industry warns that such stringent targets could lead to premature scrapping of vehicles, creating significant challenges for automakers and auto component suppliers. SIAM has instead recommended a more gradual target of 89.6 grams.
The anonymous government official explained that carmakers are reluctant to comply with annual tightening, preferring stricter norms to apply only in the final year of the five-year cycle. “They want to maintain higher emissions for three to four years and only tighten in the last year. However, BEE’s proposal enforces year-on-year emission reductions, culminating in the 71.5g target by 2032,” the official said.
Regarding adjustments in super credits for electric vehicles (EVs) and fuel cell electric vehicles (FCEVs), SIAM highlighted that the proposed changes do not align with the government’s focus on promoting these technologies.
The latest CAFE-3 draft has introduced several changes to super credits: credits for battery electric vehicles (BEVs) have been reduced from four to three, credits for strong hybrids increased from 1.2 to 2.0, and a new category—Range Extender Electric Vehicles (REEVs)—has been allocated three super credits. Super credits allow automakers to count the sale of one low-emission vehicle as multiple vehicles in fleet-average CO₂ calculations, easing compliance with overall emission targets.
Meanwhile, the most debated provision remains the 3-gram CO₂ emission cap for cars weighing up to 909 kg. This proposed relaxation for small cars has triggered a public disagreement among OEMs, with automakers having substantial small car portfolios clashing with those whose offerings mainly consist of larger vehicles.
Automakers remain divided over the proposed lower emission cap for small cars. The group with a substantial small-car portfolio is lobbying for the cap to remain, while manufacturers with predominantly larger vehicles are pushing for uniform emission standards across all vehicle sizes. In India, cars range from 750 kg to 2,500 kg, with an industry average weight of 1,170 kg.
The anonymous government official noted that the ministry is aware that “the large car lobby is seeking permission to continue higher emissions for longer…we will align our approach with the Ministry of Power.” He added that the final CAFE-3 regulations are expected to be based on ‘real-world’ emission targets, currently being defined by ICAT, and may tighten fleet-wide emissions by 20–25%, which is considered manageable.
When asked about differing positions among OEMs, the official stated, “We cannot allow large cars to continue polluting for longer,” without providing further details. The final CAFE-3 decision is still pending and will involve consultation among at least three ministries: Road Transport and Highways, Heavy Industries, and Power.
