BEE to Revise CAFE III Norms After Industry Split Over Small Car Benefits

The Bureau of Energy Efficiency (BEE) is likely to remove, in the final notification, the provision granting special relief to petrol cars weighing under 909 kg that was introduced in the September 2025 draft of the upcoming Corporate Average Fuel Efficiency (CAFE III) emission norms says a report by Business Standard. The BEE plans to modify the main equation itself -- which is used to calculate each car manufacturer's average carbon dioxide emission target -- to ensure more lenient targets for vehicles weighing below 1,229 kg and stricter targets for those above that threshold, the report added.

Industry Split Escalates to PMO Level

This rethink comes at a time when the spat amongst automakers over the provision, which introduced an additional 3 grams per kilometre (g/km) deduction for sub-909 kg cars, escalated to the highest levels of government. JSW MG Motor, Tata Motors, and Kia wrote to the Prime Minister's Office (PMO) in December, arguing that the separate carveout would disproportionately benefit a "single carmaker" that has about 95 per cent share of the sub-909kg segment.

The disagreement escalated to senior levels of government after JSW MG Motor, Tata Motors and Kia approached the Prime Minister's Office (PMO) in December, arguing that the provision would disproportionately favour a 'single carmaker' with nearly 95 per cent share of the sub-909 kg segment.

New Formula Offers Graduated Relief

According to a BEE official, as quoted in the report, the final notification is likely to feature a modified equation compared with the September 2025 draft. The changes could translate into incremental relief of around 4.51g/km to 5.31g/km per year for a 909 kg car between FY28 and FY32.

"In this way, we have tried to take care of each stakeholder's viewpoint on the matter," the BS report quoted the official as saying.

CAFE III Implementation Timeline

CAFE III norms are scheduled to take effect from April 1, 2027, and will remain in force until March 31, 2032. Under the September 2025 draft, vehicles with an unladen mass of up to 909 kg, engine displacement of up to 1,200cc and length capped at 4,000mm qualified for special treatment in fleet-average calculations.

These models were allowed a 3g/km reduction in manufacturer-declared carbon dioxide (CO2) emissions, subject to an overall cap of 9g/km per model for each compliance period.

Evolution from CAFE II Standards

At present, CAFE II mandates that original equipment manufacturers (OEMs) achieve an average fleet CO2 emission level of about 113g/km. The draft CAFE III framework moved away from a single fixed limit and introduced a weight-linked annual fuel-consumption formula, resulting in stricter and differentiated targets based on the average mass of an automaker's portfolio.

A draft released in June 2024 had proposed a uniform cap of 91.7g/km, but this was later dropped.

Industry Remains Divided

The proposed weight-based relaxations have split the industry. Automakers such as Tata Motors, JSW MG Motor, Mahindra, Hyundai and Kia have opposed special concessions, contending that they hamper competition. On the other hand, Maruti Suzuki, Toyota, Honda and Renault have backed the case for differentiated treatment for smaller and lighter vehicles.

Maruti Suzuki has argued that structured relaxations for small cars under CAFE III are neither arbitrary nor unusual. On December 1, the company said that more than 90 per cent of the global automobile market follows differentiated fuel-efficiency regimes for smaller and lighter vehicles.