The Indian government, in its new draft proposal, has scrapped the planned concession for small cars in the April 2027-bound CAFE 3 (Corporate Average Fuel Efficiency) rules after brands like Tata Motors and Mahindra argued it would benefit just one carmaker, a Reuters report stated. A clause in an 2025 draft suggested some relaxation for cars under 4 metres in length with an engine capacity of up to 1200cc and an unladen kerb weight under 909kg. Manufacturers of such cars could then claim a CO₂ reduction of 3g/km per car, capped at 9g/km, in each reporting period. Maruti Suzuki has a 95 percent share in this category of cars.
- New rules restrict over-compensation based on vehicle weight
- Average fleet emissions to be cut from 114g/km to about 100g/km by March 2032
- Penalty of up to 500 dollars to be imposed upon non-compliance to CAFE 3 norms
Increased push to electric and hybrid cars
The Reuters report, while citing the latest 41-page draft, added that the Ministry of Power has tightened other parameters and increased pressure on car companies to increase electric and hybrid car sales. The document revealed the new rules restrict over-compensation based on vehicle weight, level the field between light and heavy car manufacturers, and are aimed at delivering real-world efficiency gains, bringing in “a substantially steeper reduction pathway” for emissions.
Under the CAFE 3 proposal, passenger vehicles under the M1 group, including cars with up to 9 seats (including driver) and a kerb weight under 3,500kg, will have to adhere to the stricter emission standards. Updated every five years, they push manufacturers to adopt cleaner fuels like CNG and flex-fuel, and even electric. The new plan also decreased the extent to which heavier vehicles get more relaxed targets. “Manufacturers with heavier [models]…are required to achieve stronger intrinsic efficiency improvements,” the document further said.
CAFE 3 to feature credit-based system
Credits will be provided to firms selling more electric and plug-in hybrid electric vehicles, and they will be allowed to pool their fuel-consumption performance with other automakers. Non-compliance will lead to a penalty of up to 500 dollars (Rs 45,288 as on February 9, 2026, at 1:19pm) per car will be imposed. As per the revised plan, average fleet emissions are to be cut from 114g/km to around 100g/km over the five years to March 2032. With credits factored in, this could drop to as low as 76g/km if EVs account for 11 percent of total car sales by 2032. Factoring in the credits, emissions could fall to as low as 76g/km if electric vehicles account for 11 percent of total car sales by 2032.
