EV Makers Raise Objection over Proposed CAFE Norms, Says Undue Advantages Given to Flex-fuel, Strong Hybrid Cars

Amid the internal industry discussions over the proposed Corporate Average Fuel Efficiency (CAFE) norms, major electric vehicle manufacturers have raised strong objections and argued that the Bureau of Energy Efficiency’s (BEE) revised draft offers undue advantages to flex-fuel and strong hybrid cars. 

The EV makers said that when both technologies are combined in a single model, the numerical benefits compound and thereby such vehicles can display carbon dioxide (CO2) emissions far closer to that of EVs in compliance calculations. 

According to a NITI Aayog report from June 2021, the manufacturers said that converting a regular petrol car into a flex-fuel vehicle requires only about ₹17,000–25,000 per unit whereas developing an EV demands vastly greater investments in research, battery development, and localisation. Speaking to Business Standard, an executive at a major EV maker said, “These relaxations in draft CAFE norms for strong hybrids and flex fuel effectively reduce the compliance gap between EVs and other powertrains. That makes it harder to justify the capital-intensive transition to full-electric technology.” 

Flex fuel refers to a fuel blend that contains at least 85 per cent ethanol along with petrol. The CAFE framework sets average carbon dioxide emission targets that each automaker’s fleet must meet, measured in grams of CO2 per kilometre (g/km) for every model sold. 

Back in June 2024, the BEE published the first draft of the upcoming CAFE-3 and CAFE-4 norms, which are to be implemented between April 2027 and March 2037. In December 2024, the Society of Indian Automobile Manufacturers (Siam) submitted its comments requesting certain changes. Few months after that, Maruti Suzuki approached the BEE seeking relief for small cars through weight-based exemptions.

Following that, the BEE issued a revised draft on September 25 this year, granting that relief by introducing a weight-based exemption for the first time. Post this revision, petrol vehicles weighing up to 909 kg — with engine capacity below 1,200 cc and length under 4,000 mm —will get an additional 3 g/km deduction in their declared CO2 emissions. 

The discussions regarding such weight-based exemptions had already created a divide within the industry since earlier this year. The latest draft by BEE, which proposed further relief for strong hybrids and flex-fuel vehicles, has deepened the divide even further. As a result, Siam has yet to form a composite industry position to submit to the BEE.

Senior executive officer (corporate affairs) at Maruti Suzuki, Rahul Bharti told Business Standard, “All of us in industry are discussing mutually to evolve a solution that is comprehensive, balanced, inclusive and progressive.” 

The automobile manufacturers association did not respond to Business Standard’s queries regarding the matter. 

Small cars can also claim credits for using fuel-saving technologies such as regenerative braking, start-stop systems, low-rolling-resistance tyres or improved aerodynamics, as per the September draft. The total deduction for such a small car, including the 3 g/km relief, is capped at 9 g/km. “A small car meeting all the criteria can claim the full nine-gram benefit just under this clause,” an industry executive said. 

Then comes the Volume Derogation Factor (VDF), a multiplier used to calculate a manufacturer’s fleet-average CO₂ emissions. It allows certain low-emission vehicles, such as hybrids or EVs, to be counted as more than one vehicle, effectively lowering the overall fleet emission figure on paper and easing compliance. 

In the June 2024 draft, the BEE had stated that the VDF for EVs be raised from 3 to 4 while cutting it for strong hybrids from 2 to 1.2, which would have tightened the rules for hybrids and rewarded pure EVs. However, the September 2025 draft keeps the VDF at 3 for EVs and 2 for strong hybrids, signalling a government preference for maintaining more favourable treatment for strong hybrids. 

In addition to that, the September draft stipulates that if a strong hybrid is capable of running on flex fuel, its VDF rises to 2.5, offering even greater relief. Besides that, the BEE has introduced a Carbon Neutrality Factor (CNF), a percentage discount on declared emissions based on fuel type. Petrol vehicles using E20–E30 fuel blends get an 8 per cent discount, CNG vehicles 5 per cent, and flex-fuel or flex-fuel-compatible strong hybrids 22.3 per cent. 

Thereby, this essentially means that if a carmaker produces a strong hybrid that can run on flex fuel, the combined effect of the 2.5 VDF multiplier and the 22.3 per cent CNF discount can sharply lower its CO₂ emissions on paper, bringing them close to EVs in compliance terms, even though their actual tailpipe emissions remain significantly higher, a Business Standard report said. “On paper, a flex-fuel strong hybrid could end up appearing much closer to an EV in terms of cleanliness,” executive at an EV maker further stated.

Strong hybrids sold in India by Toyota (the Hyryder, Innova Hycross, Camry) and Maruti Suzuki (Grand Vitara and Invicto) run on regular petrol currently and therefore qualify only for the 8 per cent petrol discount, not the 22.3 per cent CNF. In order to gain the full benefit, manufacturers would have to introduce flex-fuel strong hybrids, similar to what Toyota has piloted in Brazil and showcased as a prototype in India.