India’s car buyers may soon face a double hit: the next vehicle they purchase could show lower mileage on the brochure and carry a higher price tag, even if the engine or battery is fundamentally unchanged.

From April 1, 2027, the government plans to replace India’s Modified Indian Driving Cycle (MIDC) with a tougher global testing system while simultaneously tightening fuel-efficiency norms under Corporate Average Fuel Efficiency (CAFE III) regulations. Together, the two changes will make many small cars, SUVs and electric vehicles appear 10–20 per cent less fuel-efficient, or show shorter certified driving ranges—and force automakers to add new technologies that could increase vehicle costs across segments.

For consumers, the change will be visible in two ways. A petrol car currently rated at 25 km/l could show about 21–22 km/l under the new test cycle, while an electric vehicle advertised with a 500-kilometre range may be certified closer to 430–450 kilometres.

For India’s automakers, the next 11 months are shaping up to be one of the most demanding regulatory periods in recent years. Already dealing with elevated input costs and uneven demand, manufacturers are being pressed simultaneously by stricter fuel-efficiency targets, a more realistic global test cycle and the need to protect margins without losing market share.

What Gets Added Under the Hood

Industry executives and analysts say the cost impact will vary sharply by segment because different vehicles will require different layers of hardware and engineering upgrades to meet the tougher test cycle and tighter fuel-efficiency norms.

Entry-level small cars such as the Alto and Kwid may need more sophisticated engine-control software, higher-pressure fuel injectors and improved sensors to optimise combustion and reduce emissions, adding roughly ₹30,000–₹50,000 per vehicle.

Premium hatchbacks such as the Baleno and i20 could require gasoline particulate filters, devices fitted to the exhaust to trap fine soot particles, along with upgraded catalytic converters and 12V or 48V mild-hybrid systems, increasing costs by about ₹40,000–₹60,000.

High-volume subcompact SUVs such as the Brezza, Nexon, Venue and Punch may need active grille shutters that automatically adjust airflow to reduce drag, additional aerodynamic refinements, upgraded catalytic converters and start-stop or mild-hybrid systems, lifting costs by ₹50,000–₹80,000. Compact SUVs such as the Creta, Seltos, Grand Vitara and Hyryder may increasingly require strong-hybrid systems, more advanced transmissions and improved diesel exhaust-treatment systems that use a urea-based fluid to cut harmful nitrogen oxide emissions, pushing additional costs to roughly ₹70,000–₹1 lakh per vehicle.

Larger SUVs and MPVs such as the XUV700, Safari, Scorpio-N and Innova Hycross are likely to face the steepest burden. They may require strong hybridisation, dual exhaust-treatment systems to control emissions over a wider range of operating conditions, lightweight materials such as aluminium and high-strength steel, and specialised ultra-low rolling-resistance tyres designed to reduce fuel consumption. Industry executives and analysts estimate the incremental cost could range from about ₹1.2 lakh to ₹2 lakh per vehicle.

When CAFE III Meets WLTP

Corporate Average Fuel Efficiency (CAFE III) and WLTP are arriving at the same time, creating a two-layer regulatory challenge for automakers and buyers alike.

CAFE III tightens the fleet-average carbon dioxide target each manufacturer must meet. WLTP, meanwhile, changes the testing methodology used to calculate those emissions. Because the new cycle uses higher speeds, stronger acceleration and more realistic operating conditions, the same vehicle typically records lower fuel-efficiency and higher carbon-dioxide emissions than under the current MIDC test.

In practical terms, CAFE III makes the target tougher, while WLTP makes the measurement tougher. The result is a double blow: automakers must meet stricter emissions limits using a testing regime that makes compliance harder to achieve, increasing the need for technologies such as strong hybrids, improved aerodynamics, lightweight materials and electrification.

For consumers, the consequences are likely to be lower mileage and range figures on brochures, along with the possibility of higher prices as manufacturers pass on part of the additional engineering and technology costs.

Amit Bhatt, India Managing Director at the International Council on Clean Transportation (ICCT), said the transition to WLTP generally produces lower certified fuel-efficiency and range figures because the test better reflects real-world driving.

“Depending on the vehicle and configuration, the reduction in certified fuel-economy numbers can often be in the range of 10 per cent to 20 per cent compared with less representative test procedures,” Bhatt said. “The vehicle itself does not become less efficient, but the test result moves closer to what consumers are likely to experience on the road.”

Randheer Singh, a mobility and energy-transition expert, said the financial impact extends far beyond additional testing.

“WLTP changes the baseline on which fleet-average CO₂ emissions are calculated,” Singh said. “Because the test is more representative of real-world driving, certified fuel-efficiency numbers will be lower and measured emissions will be higher. That effectively raises the compliance challenge under CAFE III and increases the value of every technology that can reduce CO₂.”

Global Advantage, Domestic Catch-Up

Premium manufacturers such as Mercedes-Benz, BMW, Audi, Volvo and Lexus may adapt more quickly because many of their global models are already WLTP-certified, allowing them to reuse existing calibrations and homologation data.

Indian automakers including Tata Motors, Mahindra & Mahindra and Maruti Suzuki are understood to be deep into validation and recalibration work. Maruti has sought limited flexibility for some lightweight small cars, while larger SUVs and utility vehicles will require full compliance.

ARAI’s recent WLTP certification for Toyota Kirloskar Motor’s Lexus LM 350h signals the transition has moved from policy discussion to operational execution.

A New Yardstick for the Industry

Over the next 11 months, automakers are expected to recalibrate products, update brochures and prepare consumers for lower certified mileage and EV-range figures.

Randheer Singh said the transition ultimately brings the story back to the same two consequences outlined at the outset: more realistic mileage and range figures for buyers, and a significantly tougher and more expensive compliance regime for manufacturers.

“Vehicles are not becoming less efficient, but proving that efficiency is about to become much tougher,” Singh said. “For consumers, that means mileage and EV-range numbers that are closer to what they are likely to experience on the road, but it could also mean higher vehicle prices as manufacturers invest in new technologies.

For automakers, CAFE III makes the target tougher while WLTP makes the measurement tougher. Together, they raise the value of every gram of CO₂ reduction and will influence technology choices, compliance costs and ultimately the prices buyers pay and the companies that emerge strongest.”

Published on May 18, 2026