CAFE III Norms: Centre Removes Small Car Exemption After Pushback From OEMs

The Centre has scrapped a proposed exemption for small cars from its upcoming fuel-efficiency regulations, news agency Reuters has reported. This move follows objections from manufacturers including Tata Motors and Mahindra & Mahindra, who contended it would disproportionately advantage a single competitor. A consultation document issued in September had recommended relaxed standards for petrol cars weighing 909 kg or less -- a provision extensively interpreted as benefiting Maruti Suzuki, which commands approximately 95% of India's small-car segment. 

According to the report, the Power Ministry has now eliminated the exemption and strengthened additional parameters, intensifying pressure on all manufacturers to accelerate electric and hybrid vehicle commercialisation.

What is the Revised Framework?

The revised regulations limit over-compensation for vehicle weight, attempt to equalise conditions between light and heavy fleet producers, and are structured to achieve tangible efficiency improvements, the latest 41-page consultation document stated.

Industry Split Over CAFE III Standards

Automakers in India remain divided over the draft Corporate Average Fuel Efficiency III (CAFE III) norms, which establish stricter fuel-efficiency and carbon emission benchmarks calculated on the average unladen weight of each manufacturer's annual sales. The framework positioned small-car producers such as Maruti Suzuki, Toyota Kirloskar, Honda and Renault against corporations selling heavier SUVs and larger vehicles, encompassing Tata Motors, Mahindra, Hyundai and Kia.

Evolution from CAFE I to CAFE III

India introduced its inaugural CAFE standards in 2017, setting up baseline fuel-efficiency and CO2 thresholds, which received further strengthening under CAFE II in 2022. The proposed CAFE III norms, unveiled in September, intend to drive emissions considerably lower when they become operational from 2027 to 2032, mandating manufacturers to reduce their fleet-average emissions to 91.7 g/km of CO2.

It also proposed a modest concession for the lightest vehicles: cars under 909 kg, with engines up to 1,200cc and a length of four metres, could claim a 3 g/km relief each year.

What Tata Motors Says?

The disagreement emerged publicly when Tata Motors' Shailesh Chandra criticised the draft, maintaining that defining "small cars" by weight was arbitrary and unnecessary. CAFE III, scheduled for 2027–2032, would substantially tighten emission limits, introduce a weight-based formula for compliance and expand the use of super-credits for hybrids, flex-fuel and electric vehicles.

Entry-Level Pricing Clash with Safety Arguments

Manufacturers concentrated on smaller cars caution that demanding targets could inflate entry-level model pricing, whilst firms marketing larger vehicles seek broader relaxations connected to weight. The division proved so pronounced that industry body SIAM has struggled to reach a unified position.

Executives like Maruti Suzuki's RC Bhargava say the norms unfairly favour heavier cars, while Chandra has raised safety concerns, noting that no model under 909 kg currently qualifies for a Bharat NCAP rating.