The Bureau of Energy Efficiency (BEE) has revised its draft CAFE-3 and CAFE-4 norms, which set fuel efficiency targets for automakers between April 2027 and March 2037. The update introduces relief for small cars, strong hybrids, and flex-fuel vehicles, while keeping stricter fleet-wide emission targets in place.
The revision follows bitter industry debates. Maruti Suzuki, India’s top small carmaker, pushed for special concessions, arguing these vehicles had limited scope for efficiency upgrades. Tata Motors, Mahindra & Mahindra and others opposed such relief. BEE ultimately created a new small car category to address these conflicting positions.
For the first time, small cars are officially recognised in CAFE rules. These include petrol cars weighing up to 909 kg, with engine size up to 1,200 cc and length under 4,000 mm. This covers entry-level hatchbacks and small family cars.
Small cars will benefit from extra emission relief. Beyond certified technology savings like start-stop systems or better tyres, they can deduct an additional 3 grams of CO₂ per kilometre in calculations. However, the advantage is capped at 9 grams per kilometre per reporting period to prevent misuse.
The revised draft retains a full volume derogation factor of 2 for strong hybrids. Earlier, BEE had proposed cutting it to 1.2, which would have reduced their compliance value. The unchanged factor benefits companies such as Maruti Suzuki and Toyota, which lead India’s strong hybrid sales.
A new Carbon Neutrality Factor (CNF) offers emission discounts for cleaner fuels. Petrol cars using E20–E30 blends qualify for 8% relief, CNG cars for 5%, while flex-fuel strong hybrids gain 22.3%. Automakers must introduce flex-fuel hybrids to fully access the largest CNF benefit.
Supercredits, which let automakers count cleaner vehicles as multiple units when calculating their fleet average emissions, have been revised. Now, each electric vehicle counts as three units, strong hybrid flex-fuels and plug-in hybrids as 2.5, strong hybrids as 2, and flex-fuel ethanol cars as 1.5.
Experts believe the new CAFE-3 relief could revive India’s struggling small car segment, which has seen a 71% drop in sales since FY19. Coupled with the GST cut on sub-4 metre cars to 18%, automakers may launch more compact, affordable models, while also boosting electric vehicle offerings.
Despite reliefs, overall compliance will also get tougher. Automakers must cut fuel use from 3.726 litres per 100 km in 2027 to 3.013 litres in 2032. Fleet-wide CO₂ will be closely monitored, with violations attracting penalties starting at ₹10 lakh per vehicle. Stakeholders have 21 days to respond.
