The country's automotive market is preparing for significant changes. Previously, the main indicator of success for companies was increasing sales volume, but from 2027, the focus will shift to the percentage ratio of electric and hybrid vehicles among all sold cars, as well as their fuel consumption and carbon dioxide (CO2) emissions levels.
The government has made an important decision aimed at reducing air pollution from vehicles and stimulating manufacturers to create more economical vehicles. The central government has issued a notification on the introduction of CAFE-3 norms (Corporate Average Fuel Economy, Phase 3) for passenger cars. These new rules will come into effect on April 1, 2027, and remain valid until March 31, 2032.
The main objective is now for the automaker to keep the average rating of its entire fleet within the established standards of cleanliness and economy. In the new CAFE-3 norms, introduced in 2027, the most significant point is that one battery electric vehicle will be counted as three vehicles in the company's total fleet. This means that electric vehicles will not only reduce road emissions but also simplify calculations for the companies themselves.
Furthermore, hybrid, flex-fuel, and other energy-efficient technologies will benefit from these changes.
CAFE-3 is a government-set standard that monitors the average fuel consumption and CO2 emissions of the entire company fleet. Its goal is to encourage manufacturers to create vehicles with lower pollution levels and greater fuel efficiency. The new CAFE-3 norms are in the implementation phase.
These rules will apply to M1 category motor vehicles in accordance with the Central Motor Vehicle Rules of 1989. Under these regulations, companies are obliged to keep the average fuel consumption of their entire fleet within limits set by the government each financial year. The Ministry of Transport and Road Transport (MoRTH) will implement these rules jointly with relevant ministries and departments, including testing, calculations, reporting, production, carbon neutrality factor, and deviation factor.
Under CAFE-3, the annual fuel consumption standard for companies will be determined based on the Modified Indian Driving Cycle (MIDC). The formula for this calculation is set as 'a x (W - b) + c'. Here, W represents the average curb weight of new vehicles produced or imported by the company for sale in India, and b has a fixed value of 1229 kilograms.
The government has set the value of 'a' to 0.00158 and 'c' to 3.9960 liters per 100 kilometers for the 2027-28 period. After this, the limit will gradually decrease. By 2031-32, 'a' will decrease to 0.00131, and 'c' to 3.3273 liters per 100 kilometers. This requires companies to continuously improve the average fuel consumption of their fleet, meaning producing more fuel-efficient vehicles.
A complete schedule of 'a' and 'c' values for the next five years has been defined for the new CAFE-3 norms. In 2027-28, 'a' will be 0.00158, and 'c' will be 3.9960. In 2028-29, they will be 0.00152 and 3.8600, respectively. Further, in the 2029-30 fiscal year, 'a' will become 0.00148, and 'c' will be 3.7585. In 2030-31, the values will reach 0.00139 and 3.5313. And in 2031-32, they are set at 0.00131 and 3.3273.
Assuming the average curb weight of the fleet is 1229 kg, the fuel consumption standard for 2027-28 will be 3.996 liters per 100 km (equivalent to approximately 25.03 km/liter). This standard will decrease to 3.3273 liters per 100 km by 2031-32. The company must ensure that the actual average fuel consumption in each financial year is equal to or below this set standard.
Under CAFE-3, the actual fuel consumption of a model will be calculated based on the CO2 emissions registered during the type approval process. A coefficient of 0.04217 is used for gasoline cars, 0.03776 for diesel, 0.06150 for LPG, and 0.03647 for CNG.
For electric vehicles, consumption is measured in kWh per 100 kilometers. Then, the consumption of various fuels and electric vehicles is converted to gasoline equivalent. According to the notification, the conversion coefficients are set as follows: 1.1168 for diesel, 0.6857 for LPG, 1.1563 for CNG, and 0.1028 for electric vehicles.
A key advantage of CAFE-3 is the so-called 'super credit' for electric vehicles. For battery electric vehicles and extended-range electric vehicles, a volume deviation factor of 3.0 is applied. This means that one electric car will be counted as three vehicles when calculating the company's sales. For plug-in hybrids and strongly hybrid vehicles running on ethanol gas, this factor is 2.5. For strong hybrid electric vehicles, it is 1.6, and for flex-fuel vehicles with ethanol, it is 1.1.