Indian Automakers Seek Consensus on Draft CAFE-3 Fuel Efficiency Norms as Deadline Nears

The Society of Indian Automobile Manufacturers (SIAM) is currently engaged in crucial discussions among its members to reach a consensus on the latest draft of the Corporate Average Fuel Efficiency (CAFE-3) standards. SIAM had requested an extension for submitting feedback to the Bureau of Energy Efficiency (BEE), pushing the deadline from October 26 to November 5-6, to allow more time for resolving differing viewpoints within the industry.

The draft CAFE-3 norms, released by the BEE in September, are scheduled to be implemented from April 1, 2027, and will remain in effect until March 31, 2032. These new regulations introduce significant changes, including a shift in measurement metrics from grams per kilometer (g/km) of carbon dioxide to litres per 100 kilometers (L/100 km). This aligns with the global Worldwide Harmonised Light Vehicles Test Procedure (WLTP) and replaces India’s current Modified Indian Driving Cycle (MIDC). The draft also permits up to three manufacturers to form a compliance 'pool', essentially being treated as a single entity for meeting the standards. Notably, the weighted average fuel efficiency target will change annually.

Major electric vehicle (EV) manufacturers have voiced strong objections to the revised draft, arguing that it provides undue advantages to flex-fuel and strong hybrid vehicles. This has created a division within the industry; some companies, including Maruti Suzuki India Limited, Toyota Motor, Honda Cars, and some European automakers, are keen on protecting the market for hybrid cars. Conversely, companies like Tata Motors Limited and Mahindra & Mahindra Limited are advocating for greater support and incentives for electric vehicles.

Sources suggest that the industry might pursue a middle-ground approach, potentially introducing new definitions based on vehicle size (related to GST) and an affordability quotient to guide incentives.

Impact These CAFE-3 norms will significantly influence the future product development, technological investments, and market strategies of automotive companies in India. The final regulations could accelerate the adoption of EVs or prolong the relevance of advanced internal combustion engines and hybrids, directly affecting the financial performance and stock valuations of auto manufacturers. The conflicting interests highlight potential strategic divergences among key players. Impact Rating: 8/10

Difficult Terms: * **CAFE (Corporate Average Fuel Efficiency) norms:** Regulations that set targets for the average fuel efficiency of vehicles sold by a manufacturer. These standards aim to reduce fuel consumption and emissions. * **SIAM (Society of Indian Automobile Manufacturers):** An apex industry body representing Indian automobile manufacturers and the Indian automotive industry, working on policy and regulatory matters. * **BEE (Bureau of Energy Efficiency):** A statutory body under the Ministry of Power, Government of India, responsible for developing and implementing energy efficiency programs. * **WLTP (Worldwide Harmonised Light Vehicles Test Procedure):** A globally harmonized standard for determining pollutant emissions and fuel consumption of conventional, hybrid, and electric cars, replacing older national test cycles. * **MIDC (Modified Indian Driving Cycle):** India's previous standard for testing vehicle emissions and fuel economy before the adoption of WLTP. * **Flex-fuel cars:** Vehicles designed to run on more than one type of fuel, or a mixture of fuels, such as gasoline and ethanol. * **Strong hybrid cars:** Vehicles equipped with both an internal combustion engine and an electric motor, capable of operating independently on electric power or in conjunction with the engine. * **EV (Electric Vehicle):** A vehicle powered entirely by electricity stored in rechargeable batteries. * **GST (Goods and Services Tax):** A consumption tax levied on the supply of goods and services. In this context, it might be used as a basis for determining vehicle affordability and associated incentives.