CAFE-3 Drops Small-Car Relief and Hands EVs a 3x Credit

India’s Ministry of Power has locked CAFE-3 from April 1, 2027, counting each battery EV as three cars and dropping the 3 g/km break for petrol models under 909 kg. The rules run to March 31, 2032 and apply to new M1 passenger vehicles made or imported for sale in India.

Maruti Suzuki lost the named small-car line it spent a year chasing. Tata Motors, Mahindra and other EV sellers keep the fattest volume factor in the fleet maths, while the weight curve itself was flattened so a light hatch still faces a softer gram target than a heavy SUV.

A 27-Month Fight Ends Without a Small-Car Carve-Out

The Bureau of Energy Efficiency, which sits under the Ministry of Power, put out the first CAFE-3 draft in June 2024. Maruti, India’s largest carmaker and the house that still dominates cheap hatches, then asked for extra relief for light petrol cars. A September 2025 draft granted it: a 3 g/km deduction for petrol cars up to 909 kg.

Tata Motors and JSW MG Motor took the fight to the Prime Minister’s Office. They argued that a weight cut would reward a segment in which Maruti holds about 95% share, and that shaving mass sat badly next to crash safety. Shailesh Chandra, then as now MD and CEO of Tata Motors Passenger Vehicles, called a weight test “arbitrary” and said it clashed with the push for safer cars. Rahul Bharti, Maruti’s senior executive officer for corporate affairs, had warned that cars under 909 kg might have to be pulled if the targets were “unscientific and unjust”.

A revised draft in July 2026 dropped the 3 g/km line. Comments closed on August 6. The gazette notification dated September 29, issued as S.O. 5346(E), confirms there is no separate small-car concession.

THE DRAFTING CALENDAR

1. June 2024: BEE releases the first CAFE-3 draft for FY 2027-28 to FY 2031-32.
2. September 2025: A revised draft adds a 3 g/km deduction for petrol cars up to 909 kg and uses a 1,170 kg reference weight.
3. July 2026: A further draft removes that deduction; stakeholder comments run to August 6.
4. September 29, 2026: The Ministry of Power notifies the final norms as S.O. 5346(E).
5. April 1, 2027: CAFE-3 starts for new M1 vehicles and replaces the current phase.

Toyota had backed relief for small cars. Hyundai, Kia and Mahindra had opposed a special class. The Society of Indian Automobile Manufacturers could not speak with one voice, so the ministry wrote the settlement into the main equation instead of a side clause.

What the Flattened Weight Line Pays Light Fleets

CAFE targets are not a single cap on every model. Each carmaker’s allowed petrol-equivalent use, in litres per 100 km on the Modified Indian Driving Cycle, is a × (W – 1,229) + c, where W is the sales-weighted unladen mass of its eligible fleet. The coefficient a falls from 0.00158 in FY 2027-28 to 0.00131 in FY 2031-32. The constant c falls from 3.9960 to 3.3273.

At the new reference mass of 1,229 kg, the ministry’s press note puts the benchmark at 3.996 litres per 100 km in FY 2027-28 and 3.3273 litres in FY 2031-32, an improvement of 16.7 per cent over the period. Using the notified CO2 conversion of 23.7135, that is about 94.8 g/km in the first year and about 78.9 g/km in the last. The same press note raises the reference mass from 1,082 kg under the current phase, a 13.6% increase that tracks a heavier passenger-car mix.

FLEET TARGET AT 1,229 KG

Plug 909 kg into the FY 2027-28 line and the allowed figure is about 82.8 g/km. The September 2025 formula would have sat near 76 g/km at that mass. At 2,500 kg the new line is about 142.4 g/km in FY 2027-28, against about 151.4 g/km under the older slope. Light fleets got room relative to that draft. Heavy fleets got a harder number.

The revised target line has been flattened to provide a more balanced, weight sensitive approach, with relatively softer targets for lighter vehicles and greater fuel efficiency requirements for heavier vehicles.

Ministry of Power, press note, September 30, 2026

Between FY 2027-28 and FY 2031-32 a 1,700 kg fleet’s target falls by about 18.9 g/km, from 112.4 to 93.5, while a 909 kg fleet falls by about 13.8 g/km, from 82.8 to 69.0. In percent terms both move by about 17%. The extra heat on heavy metal is in grams, not in the rate of tightening. That is how Maruti can lose a named sop and still see a softer hatch target than the 2025 draft offered, while Tata and Mahindra, whose showrooms lean on SUVs, need another lever.

Battery Cars Count Triple in the Fleet Average

That lever is volume. Battery electric vehicles and range-extended electrics carry a 3x factor when the sales-weighted average is built. Plug-in hybrids and flex-fuel strong hybrids carry 2.5. Strong hybrids carry 1.6. Flex-fuel ethanol cars carry 1.1. Effective volume is the factor times units sold, so a few electric nameplates pull the corporate number down harder than the same number of petrol hatches can.

SUPER-CREDIT VOLUME FACTORS

Take 1,000 petrol cars at 95 g/km and 100 electrics at 36.6 g/km equivalent. With no extra weighting the mix sits at about 89.7 g/km. Count each electric three times and the same sales print about 81.5 g/km. That is the compliance gap a thin EV line can close without touching the petrol engines that still pay the bills.

Tata, Mahindra and JSW MG have been building that line. Toyota and Maruti have put more weight on strong hybrids. Hyundai has promised a “green” mix of EVs, hybrids and CNG above 50% within four to five years, Tarun Garg, MD and CEO of Hyundai Motor India, said after the notice. The 3.0 factor is still the largest number on the page, and it is the reason an SUV maker with a working electric book can live with a tighter gram line than a hatch specialist that is late to battery volume.

The 2.5 factor on plug-in hybrids sits uncomfortably close to that 3.0. A plug-in SUV that still burns petrol is almost as useful in the ledger as a battery car that does not. That is the objection that stuck once the notice landed: the multiplier rewards the badge as much as the tailpipe. It also does nothing to put an electric hatch on the road below Rs 10 lakh, which is still where most Indian buyers actually shop.

A Carbon Discount for E20, Flex-Fuel and Biogas

CAFE-3 does not force a single powertrain. A Carbon Neutrality Factor knocks CO2 off the declared figure for some fuels. E20 and richer notified ethanol-petrol blends, including on strong hybrids and plug-ins, get 8%. Flex-fuel ethanol vehicles get 22.3%. CNG vehicles get 5% or the notified compressed biogas blend share, whichever is higher. Diesel gets a cut tied to the biofuel blend the petroleum ministry notifies. The All India Distillers’ Association welcomed that ethanol line, which is the quiet win for a fuel the battery lobby does not own.

The list of recognised fuel-saving hardware grows from four items to 12. Each eligible item is worth 1 g/km, with a cap of 9 g/km. Claims in the first three-year block can rest on self-declaration. From FY 2030-31 they need tests the Ministry of Road Transport and Highways will write.

TWELVE TECHNOLOGIES WORTH 1 G/KM EACH

• Start-stop systems
• Tyre-pressure monitoring
• Regenerative braking
• Transmissions with six or more forward gears
• 12V or 48V efficient alternators
• 12V or 48V motor-generators (micro-hybrids)
• Exterior LED lighting
• Advanced glazing
• Electric water pumps
• High-efficiency air-conditioning
• Solar-reflective paint
• PWM-controlled radiator fans

For a petrol-heavy fleet that cannot flood the average with 3.0x electrics, those 9 grams are the slow route: start-stop, a sixth gear, LED lamps and a 48V kit stacked until the cap is hit. Suppliers in lighting, glazing, thermal kit and mild-hybrid electrics are the other winners in a notice that never names them.

Who Pays Rs 2,500 a Gram When the Passbook Runs Dry

The five years split into two compliance blocks, three years from FY 2027-28 to FY 2029-30 and two years from FY 2030-31 to FY 2031-32. Each maker gets a passbook. Beat the year’s target and credits land. Miss it and debits land. Credits can be carried inside a block and traded with other carmakers on private terms. They lapse when the block ends.

A maker that still sits in debit can buy from the Bureau of Energy Efficiency. The window is 30 days, from October 1 to October 31 of each assessment year.

BEE BUYOUT PRICE PER G CO2/KM

• FY 2027-28: Rs 2,500
• FY 2028-29: Rs 3,000
• FY 2029-30: Rs 3,500
• FY 2030-31: Rs 4,000
• FY 2031-32: Rs 4,500

The ladder rises by Rs 500 a year, so a company that plans to write a cheque instead of changing its mix pays more every season. Makers that build or import fewer than 1,000 eligible vehicles in a reporting period are exempt from the fleet target but must still file annual average fuel-consumption figures with BEE. That is a volume exemption, not a second small-car break.

Bank of America Securities, in a note on October 1, put Tata Motors and Maruti as the best placed on current emissions, and said Mahindra gets some room because electric SUVs already make up 12% of its SUV volumes. Citi’s auto desk leaned toward Maruti, Mahindra and Hyundai. Those reads sit on today’s mix. The passbook will judge the mix that actually sells from April 2027.

Kant Calls the Package Status Quo

Amitabh Kant, former CEO of NITI Aayog, used the gazette link to argue that the rules follow the industry. He said India imports almost 90% of its oil, that electric cars are already close to 8% of sales this financial year, and that a target he reads as 11% electric cars by 2032 is not a leap. He also asked how BEE can sell the credits it is meant to police.

The new CAFE norms are backward looking at worst and status quoist at best. The regulation follows the industry instead of leading it. EVs become one option among many, when they should be the destination.

Amitabh Kant, former CEO, NITI Aayog, on X

He called the package a huge missed opportunity. SIAM president Shenu Agarwal called the same notice a structured five-year map with “aggressive annual targets” and a market-based way to comply. Bharti said Maruti was a front-runner on absolute efficiency in the first two CAFE phases and would “continue its leadership in CAFE-III also.” Chandra welcomed the “continued recognition of zero-emission technologies.” Vikram Gulati, country head and executive vice president at Toyota Kirloskar Motor, thanked the ministry for scoring battery cars, range extenders, plug-ins, strong hybrids and flex-fuel on one sheet.

The existing fuel consumption standards for passenger cars already tied a maker’s average to the average mass of what it sold. CAFE-3 keeps that logic, raises the reference mass, and then sells extra counting rights to electrics, hybrids, ethanol and a longer tech list. Maruti did not get the 3 g/km clause. Tata did not get the steep heavy-car slope of the 2025 draft. Battery cars did not keep the 4.0 factor floated in 2024. Each camp left with a piece, and the piece that moves the average fastest is still a battery car counted three times.

The first cars these numbers will judge go on sale from April 1, 2027. Credits that beat the line can be sold. Debits can be bought from BEE, at a price that rises every year of the cycle.

Frequently Asked Questions

When Do India’s CAFE-3 Norms Take Effect?

They apply from April 1, 2027 to March 31, 2032 to new M1 passenger vehicles under the Central Motor Vehicle Rules, 1989, covering hatchbacks, sedans, SUVs and MPVs with up to eight passenger seats besides the driver. Carmakers must declare CO2 under both MIDC and the Worldwide Harmonized Light Vehicles Test Procedure from that date, though the Ministry of Power still has to notify the factor that will convert the corporate target from MIDC to WLTP.

What Super-Credit Multipliers Apply Under CAFE-3?

Battery electric and range-extended electric vehicles carry a 3.0 volume factor, plug-in hybrids and flex-fuel strong hybrids 2.5, strong hybrids 1.6 and flex-fuel ethanol vehicles 1.1. The June 2024 draft had set battery electrics at 4.0 and strong hybrids at 2.0, and it included a 5.0 factor for hydrogen fuel-cell cars that does not appear in the final table.

Do Small Cars Get a Separate CAFE-3 Concession?

No. The September 2025 draft would have subtracted 3 g/km of CO2 for petrol cars that were under 909 kg, under 1,200 cc and under four metres. That line is gone. The only volume relief left is an exemption for makers that build or import fewer than 1,000 eligible vehicles in a reporting period, who still have to file annual fuel-consumption figures with the Bureau of Energy Efficiency.

How Is Petrol-Equivalent Fuel Consumption Calculated?

Declared tailpipe CO2 in g/km is divided by 23.7135 to get petrol-equivalent litres per 100 km. Diesel, LPG, CNG and electric energy use are converted with factors of 1.1168, 0.6857, 1.1563 and 0.1028. Electric use is measured in kWh per 100 km. Each approved fuel-saving technology can claim 1.0 g/km, equal to 0.0422 litres per 100 km, up to 9.0 g/km or 0.3795 litres per 100 km.

When Can Carmakers Trade or Buy CAFE-3 Credits?

Credits and debits sit in a maker-level passbook and can be carried inside a compliance block; unused credits then lapse. Makers may trade with each other or buy from the Bureau of Energy Efficiency only in a 30-day window from October 1 to October 31 of each assessment year. Buyout prices are Rs 2,500 per g CO2/km in FY 2027-28, then Rs 3,000, Rs 3,500, Rs 4,000 and Rs 4,500 in the next four years.