CAFE-3 Norms Notified: Govt Retains EV Incentives, Removes Small Petrol Car Concession

The government has notified new corporate average fuel economy (CAFE-3) norms for automakers, removing a separate concession proposed for small petrol cars. The norms that were notified by the Ministry of Power will come into effect from April 2027 and remain in force until March 2032. However, the Centre had proposed a 3 grams per km concession for petrol cars weighing up to 909 kg in the previous year. The concession was opposed by several leading automakers.

Moreover, the final rules do not provide a separate concession for cars below 909 kg. Instead, the government has changed the formula used to calculate a manufacturer's fleet-wide carbon dioxide emissions target. The reference vehicle weight has been increased to 1,229 kg from 1,170 kg in the September 2025 draft. The final rules also use a lower annual weight adjustment. The changes provide relatively more relief to lighter vehicle fleets while making the targets stricter for heavier fleets.

Under the final formula, a 909-kg car has an FY28 emissions target of about 82.8 grams of CO2 per km, compared with about 76 grams under the September 2025 draft. But for a 2,500-kg vehicle, the target is about 142.4 grams under the final formula, compared with about 151.4 grams under the earlier formula. In addition, the final CAFE-3 rules also retain incentives for cleaner vehicles through a super-credit mechanism.

One battery electric vehicle will be counted as three vehicles for calculating a manufacturer's fleet performance. The same 3x factor applies to range-extended electric vehicles. Plug-in hybrids and strong hybrids running on flex-fuel will get a 2.5x factor, while strong hybrids will get a 1.6x factor. Flex-fuel vehicles will get a 1.1x factor. Additionally, the rules also introduce a credit-debit system. Manufacturers that perform better than their emissions targets will earn credits, while those falling short will accumulate debits.

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