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Updated on 16 Nov 2025, 05:02 pm
Reviewed By
Satyam Jha | Whalesbook News Team
The Indian government is proposing support for small cars under the forthcoming Corporate Average Fuel Efficiency (CAFE III) norms, scheduled to be implemented from April 1, 2027, to March 31, 2032. Officials are considering an additional 3 g/km carbon-dioxide (CO2) deduction for petrol vehicles that meet specific small-car criteria: weighing up to 909 kg, with an engine capacity up to 1,200 cc and a length up to 4,000 mm.
This initiative is motivated by the significant demand for affordable entry-level vehicles in India and the inability of many two-wheeler users to directly transition to bigger cars or electric vehicles (EVs) due to cost constraints. The government fears that overly stringent emission targets for small cars could force manufacturers to exit the segment, thereby restricting upward mobility for consumers and potentially hindering the nation's development goals.
However, this proposed relief for small cars is viewed as "marginal," offering a real-world benefit of only about 1 g/km because only a portion of production for manufacturers like Maruti Suzuki and Hyundai falls within the small-car definition. In contrast, EVs are set to receive a much larger advantage of around 13-14 grams.
The Society of Indian Automobile Manufacturers (SIAM) has submitted its feedback to the Bureau of Energy Efficiency (BEE), revealing a split within its members. Manufacturers focused on small cars, such as Maruti Suzuki, Toyota Kirloskar Motor, Honda Cars India, and Renault India, support the small-car-friendly provisions. Conversely, manufacturers with a stronger presence in SUVs and larger cars, including Tata Motors, Mahindra & Mahindra, Hyundai Motor India, and Kia India, favour weight-based relaxations for their bigger vehicles which inherently emit more.
SIAM has suggested adopting a combined carbon-credit mechanism over five years instead of strict annual compliance targets, indicating the industry's desire for flexibility while not necessarily opposing the final emission goals. An inter-ministerial meeting is expected to move the proposal forward.
Impact: This policy decision is crucial for the Indian automotive industry. It could help preserve the competitive pricing of small cars, ensuring affordability for a large segment of the population. Manufacturers will need to strategize their production and compliance efforts based on these norms. The debate highlights the balancing act between environmental goals and socio-economic considerations for mass transportation. Companies focusing on small cars may see continued market relevance, while those heavily invested in larger vehicles might face increased pressure to innovate in fuel efficiency or electrification. Rating: 7/10
