Corporate Average Fuel Efficiency (CAFE-3) norms, scheduled for implementation in 2027-28 are set to transform from technical regulations into a major industrial conflict among Indian Original Equipment Manufacturers (OEMs). Here are the pointers that make things simpler to understand.
1. The Regulatory Evolution India introduced CAFE-1 in 2017 and CAFE-2 in 2022. CAFE-3 represents a significantly tighter cap on carbon emissions. Unlike BS-VI norms, which focus on tailpipe pollutants, CAFE targets the average fuel consumption of an OEM’s entire vehicle fleet.
2. The “Small Car” Debate The initial draft in June 2024 faced heavy criticism from Maruti Suzuki. Chairman RC Bhargava argued that the norms were based on European standards and unfairly penalized lightweight vehicles. Maruti’s concern was that without relaxation, affordable models like the Alto and Swift would become unviable. In response, the government revised the draft in September 2025, proposing a 3-gram lower emission cap specifically for cars weighing under 909 kg.
3. Division Among Industry Giants The revision sparked a “slugfest” among manufacturers, splitting the industry into two camps:
Pro-Relaxation: Led by Maruti Suzuki, arguing that small cars are inherently more resource-efficient and essential for low vehicle penetration in India (24 cars per 1,000 people).
Anti-Relaxation: Led by Tata Motors and Mahindra & Mahindra. These OEMs, who have invested billions in EVs and SUVs, argue that concessions for small cars are unjustified. They believe stricter norms drive innovation and that special treatment rewards those who haven’t invested in green tech.
4. The Role of SIAM The Society of Indian Automobile Manufacturers (SIAM) struggled to find a consensus. While tasked with presenting a unified industry front, the internal disagreements were so severe that the matter was eventually escalated to the Prime Minister’s Office (PMO).
5. Future Outlook As of late 2025, the final framework remains undecided. The government is “walking a tightrope” to balance environmental commitments with vehicle affordability. For OEMs, the next 18–24 months are critical for finalizing product portfolios, as CAFE-3 will dictate whether they lean toward EVs, hybrids, or flex-fuel engines to meet the strict targets.
