CAFE 3 norms notified: Carmakers face 16.7% tighter CO₂ target at 78.9 g/km by FY32; lighter cars get more headroom

The government has notified the third phase of the Corporate Average Fuel Economy (CAFE-3) norms, tightening fuel-efficiency and carbon-emission requirements for passenger vehicles from April 1, 2027. The regulations will remain in force until March 31, 2032, setting progressively tighter fleet-average targets for carmakers.

Under the new framework, the annual average fuel-consumption benchmark will tighten from 3.996 litres per 100 km in FY2028 to 3.3273 litres per 100 km in FY2032, an improvement of around 16.7% over the five-year period. The corresponding CO₂ benchmark will decline from 94.76 grams per km to 78.90 grams per km. The Ministry of Power said the year-on-year tightening is aimed at driving progressive improvements in fuel economy.

Revised weight curve gives lighter cars more headroom

The final framework removes the separate 3 g/km concession for petrol cars weighing below 909 kg that featured in the earlier draft. However, the government has revised the underlying target curve, flattening it to create a more balanced, weight-sensitive framework.

The Ministry of Power said in a statement that the revised target line provides relatively softer targets for lighter vehicles, while requiring greater fuel-efficiency improvements from heavier vehicles. The reference weight has also been raised 13.6%, from 1,082 kg to 1,229 kg, reflecting the changing weight profile of India's passenger-vehicle fleet.

The framework has simultaneously expanded the list of recognised fuel-conservation technologies from four to 12. Carmakers can claim a concession of 1 g CO₂/km for each eligible technology, subject to a maximum of 9 g CO₂/km.

EVs, hybrids and cleaner fuels get compliance benefits

Battery electric vehicles (BEVs), range-extended electric vehicles (REEVs), plug-in hybrid electric vehicles (PHEVs), strong hybrid electric vehicles (SHEVs) and flex-fuel vehicles will receive volume derogation factors, or “super credits”, in fleet-average calculations. BEVs and REEVs will receive a 3x compliance factor.

The Ministry said renewable and low-carbon fuels, including ethanol-blended petrol, biofuels and compressed biogas (CBG), will be recognised through a Carbon Neutrality Factor (CNF), giving manufacturers another route to improve fleet-level CAFE performance.

Carmakers can also meet their obligations through specified two-year and three-year compliance blocks. Manufacturers that outperform their targets can generate and carry forward credits, while those facing a shortfall can use eligible carry-forward provisions, trade credits with other manufacturers or purchase credits through the Bureau of Energy Efficiency's buyout mechanism.

M&M welcomes ‘pragmatic’ framework

Welcoming the notification, Velusamy R, President – Automotive Business, Mahindra & Mahindra, said the framework strikes a balance between environmental requirements, industry feasibility and energy security.

“The targets are appropriately ambitious and provide a clear trajectory through 2031-32,” he said, welcoming the compliance blocks, technology credits, cleaner-fuel benefits and super credits for EVs and other advanced technologies.

The new framework therefore combines tighter fleet-average targets with multiple technology incentives and credit-based compliance options, giving carmakers greater flexibility as they transition towards cleaner and more fuel-efficient vehicle portfolios.