The industry is proposing adoption of the Worldwide Harmonised Light Vehicles Test Procedure or WLTP cycle in place of or along with the Modified Indian Driving Cycle to better reflect real-world driving conditions | Photo Credit: VELANKANNI RAJ B

What are CAFE norms? When were they introduced and what is their objective?

Corporate Average Fuel Efficiency or CAFE norms were introduced in response to the burgeoning environmental pollution emitted by vehicles across categories. It refers to fuel economy standards implemented by governments. These norms aim to reduce fuel consumption and CO2 emissions, thereby contributing to energy conservation and environmental protection. First introduced in 2017, the primary goal of CAFE norms is to incentivise automakers to produce and sell more fuel-efficient vehicles. It does not target individual vehicle models, but rather the average fuel efficiency of the entire fleet of vehicles sold in a specific year by a producer. Not meeting the set targets, and failure to comply can result in heavy penalties or fines.

What are the changes proposed in the CAFE 3 norms?

The CAFE 3 norms, which are proposed to be implemented from 2027-28, aims to further tighten fuel economy standards for passenger vehicles (PVs) in line with India’s commitments to reduce greenhouse gas emissions and improve energy efficiency in the transport sector. Under the proposed norms, PVs must achieve lower CO2 emissions per kilometer – in the range of 91–95 g/km, compared to around 113 g/km under CAFE 2.

The industry is proposing adoption of the Worldwide Harmonised Light Vehicles Test Procedure or WLTP cycle in place of or along with the Modified Indian Driving Cycle (MIDC) to better reflect real-world driving conditions. Fuel efficiency targets will continue to be based on the vehicle’s kerb weight, but the formula can be revised to push OEMs towards lighter and more efficient vehicles.

How have CAFE norms impacted sales of various vehicle categories?

CAFE norms have had a significant impact on sales and design of various vehicle categories in India. These regulations have also influenced several consumer preferences and strategies adopted by car manufacturers. For instance, Maruti Suzuki India has been reducing the kerb-weight of its vehicles for more than a decade now, which typically offer better mileage, have gained popularity as people became more conscious of fuel costs and efficiency. Cars with smaller engine capacities – under 1.2 litre for petrol and 1.5 litre for diesel -- have seen better sales as OEMs optimise them to meet CAFE standards without increasing vehicle weight or emissions. However, in India, CAFE targets follow a linear weight-based approach, whereby a lower weight implies a more stringent target. Under this linear system, the CAFE framework gives heavier vehicles more relaxed absolute CO2 limits. A large SUV or premium car is allowed a much higher CO2 target, whereas smaller cars get a much more stringent target. Therefore, due to the upward sloping line set by CAFÉ, lower weight cars (entry level cars) must achieve much more stringent lower absolute targets, whereas heavier cars have higher absolute targets.

Why is Maruti Suzuki unhappy with CAFE 3 norms? Is it right in saying that sale of small cars is down due to CAFE 3 norms?

One of the common strategies OEMs use to lower CO2 emissions is reducing vehicle weight while maintaining the safety characteristics of the vehicle. But, under India’s CAFE mechanism, lighter cars are assigned stricter absolute CO2 targets. This means that even if a car becomes more efficient through light-weighting, it may still fall short of its now-lower target. And, that is why companies like Maruti Suzuki India are unhappy because the current framework does not adequately reward light-weighting, especially for already light, entry-level cars. According to independent consulting firms like Nomura Research, globally too, all major automotive markets including the US, China, Japan, Korea, and Europe offer regulatory protection to small cars under their CAFE frameworks due to their environmental and socio-economic value. In contrast, India’s linear weight-based CAFE approach penalises lighter vehicles with disproportionately stringent CO2 targets. It will not be right to say that sale of small cars is down due to CAFE 3 norms because there are various other factors which have led to the decline of small cars in India. One of the biggest reasons is that there aren’t many choices when it comes to small cars in the market and, secondly, consumer demand is shifting toward larger vehicles like SUVs with more features, better powertrains, and comfort.

Is the Centre likely to review these norms given the protests

The Centre has asked the industry body, Society of Indian Automobile Manufacturers, and its members to discuss the norms among themselves; in the meanwhile, the Ministry of Road Transport and Highways has taken up the matter with the related ministries, including the Ministry of Heavy Industries and the Power Ministry.