CAFE 3 Norms Notified: Small Cars Get Relief Through Flatter Curve, Maruti Gains

CAFE 3 Norms Final: What Changed for Carmakers

The Ministry of Power has notified the final CAFE 3 fuel-efficiency norms for passenger vehicles, ending a 27-month dispute that had split the industry. The norms take effect from 1/4/2027 and run until 31/3/2032, tightening industry-wide efficiency targets by about 17 percent through FY32 while giving lighter fleets more headroom than earlier drafts.

The headline decision: no separate concession for small cars. The September 2025 draft had proposed a 3 g CO2/km deduction for petrol cars weighing up to 909kg, a provision Maruti Suzuki pushed for and rivals including Tata Motors, Hyundai, Mahindra and Kia opposed, since Maruti dominates that segment. Instead, the government flattened the weight curve itself and raised the reference fleet weight to 1,229kg from 1,082kg under existing norms.

The winners and losers are now clearer. Maruti Suzuki, Renault and Nissan benefit from light portfolios, with Maruti additionally armed with CNG and strong hybrids. Tata Motors can combine small cars, CNG and EVs, Toyota leans on strong hybrids, and Mahindra can use electric SUVs to offset its heavy conventional fleet. Carmakers dependent on big petrol and diesel SUVs face the tightest targets.

Technology credits do much of the heavy lifting. Battery-electric and range-extended vehicles count with a 3x volume multiplier, plug-in and flex-fuel strong hybrids at 2.5x, conventional strong hybrids at 1.6x and flex-fuel ethanol vehicles at 1.1x. Manufacturers can trade credits or buy them from the Bureau of Energy Efficiency at ₹2,500 per g CO2/km in FY28, rising to ₹4,500 by FY32; a 1 g/km deficit across one lakh vehicles implies a ₹25-crore buyout at the FY28 rate.

What this means for you

No overnight change: your current car is unaffected, and the first compliance year is FY28. Expect more CNG, hybrid and small-EV launches through the decade, since those now earn disproportionate regulatory credit, and expect heavy performance SUVs to carry price premiums as carmakers recoup compliance costs. For the full picture of India's efficiency transition, follow our policy coverage on AUTOINDIA and compare electrified models on our compare page.

(Sources: Ministry of Power CAFE 3 notification dated 29/09/2026, thehindubusinessline.com, livemint.com, business-standard.com, economictimes.indiatimes.com, indianexpress.com. Images: Wikimedia Commons, CC BY-SA 4.0 and CC0)