Opinion: CAFE 3 Draft Gives Carmakers the Clarity They’ve Long Demanded — Now They Must Deliver

There is light at the end of the smog. The Bureau of Energy Efficiency (BEE), which operates under the Ministry of Power, has released a draft of the CAFE 3 norms for consultation and discussion. The Ministry of Road Transport and Highways (MoRTH) is tasked with consulting the stakeholders affected by these norms and plays an advisory role in formulating these standards.

The CAFE 3 norms are scheduled to take effect in April 2027, with standards that become progressively tighter through March 2032. The annual fuel consumption standards will be calculated as weighted averages in litres per 100 km, factoring in unladen vehicle mass and CO₂ emissions. Vehicle weight will play a major role in these calculations. Importantly, India will transition from the Modified Indian Driving Cycle standards for measuring emissions to the globally accepted WLTP cycle.

The Worldwide Harmonised Light Vehicles Test Procedure may be a mouthful, but it offers a more realistic and accurate assessment of vehicle CO₂ and pollutant emissions, fuel consumption, and electric range. Using both laboratory and real-world testing, the WLTP applies to all powertrains – ICE, hybrids, plug-in hybrids, and BEVs. Even if adapted for Indian driving conditions, adopting the WLTP protocol will help OEMs in India export their vehicles to many developed markets – a significant side benefit.

So what does the CAFE 3 draft propose? Broadly:

• CO₂ emissions capped at 91.7 g/km, with limits tightening over five years, and fuel consumption reduced to between 3.73 and 3.01 litres per 100 km.
• Small sub-4 metre, 1,200cc petrol cars with an unladen weight of up to 909 kgs will get a relaxation of 3 g/km in CO₂ emissions, capped at 9 g/km per year.
• Fuel consumption for diesel, CNG, LPG, and electric vehicles will be calculated as petrol equivalents, with formulas provided in the draft.
• The policy incentivizes the development and launch of electric, hybrid, and flex-fuel vehicles, as these will help achieve compliance more easily.
• It introduces a ‘credit system’: each electric or range-extender hybrid car sold counts as three, plug-in hybrids as 2.5, strong hybrids as 2, and flex-fuel ethanol vehicles as 1.5.
• Petrol vehicles running on E20-E30 ethanol blends can apply an 8% Carbon Neutrality Factor (CNF) reduction to their tailpipe CO₂ emissions.
• Flex-fuel ethanol vehicles and strong hybrid flex-fuel vehicles get an even higher CNF benefit – a 22.3% reduction applied to their reported CO₂ emissions. CNFs also apply to CNG vehicles.
• Interestingly, up to three manufacturers may form a compliance pool to be treated as one entity for regulatory purposes. For instance, an ICE-only OEM can ally with an EV-focused manufacturer to meet the norms.

The norms are currently at the draft stage and subject to stakeholder feedback, which may lead to some revisions. But the direction set by the Indian government is now clear. There will be no more lobbying among OEMs over hybrids versus EVs, or diesel versus petrol. The message is unmistakable: the norms will tighten each year, and selling more EVs, hybrids, and flex-fuel vehicles will be essential for compliance.

Unladen weight is a key parameter in the CAFE 3 draft, so expect more innovations in weight reduction and lightweighting strategies. There will likely be a greater use of advanced plastics, aluminium, high-strength steel, composites, and perhaps even carbon fibre. Beyond powertrains, improvements in aerodynamics and rolling resistance will also come into focus. Manufacturers will have to invest in multi-energy platforms, with every element of the powertrain undergoing refinement — every incremental gain in fuel efficiency and CO₂ reduction will count.

Instead of the previous one-step-forward, two-steps-back approach, the new CAFE 3 draft norms provide clear, long-term direction. Policy clarity is what OEMs have long sought, and this will now help them leverage various State-level incentives for low or zero-emission vehicles. While OEMs should, of course, respond to the draft with constructive feedback and adopt strategies that best suit their portfolios, these norms could help transform India’s passenger car industry into a truly global force – and serve as a model for other emerging markets to follow. Exciting times, not just for OEMs but the entire vendor community too.