India has notified the third phase of Corporate Average Fuel Economy (CAFE III) norms, introducing stricter fleet-efficiency targets for passenger vehicle manufacturers from April 2027 to March 2032. The framework gives electric vehicles the highest super-credit while allowing automakers to trade compliance credits.
EVs Get Highest 3x Super-Credit
Under CAFE III, different powertrains receive varying compliance multipliers:
- BEVs and range-extended EVs: 3.0x
- Plug-in hybrids and flex-fuel strong hybrids: 2.5x
- Strong hybrids: 1.6x
- Flex-fuel ethanol vehicles: 1.1x
This gives EVs the strongest compliance advantage as manufacturers work to meet progressively tighter fleet targets.
Fleet Efficiency Targets Tighten Through FY32
CAFE III uses a weight-linked formula based on the sales-weighted average unladen mass of an automaker’s eligible fleet.
For a reference fleet weight of 1,229kg, the permitted average fuel consumption will decline from 3.996 litres/100km in FY28 to 3.3273 litres/100km in FY32, equivalent to roughly 94.8g to 78.9g CO2/km.
The previously proposed special concession for certain small petrol cars has not been retained.
CNG And Ethanol Also Receive Benefits
The rules provide additional compliance routes through a Carbon Neutrality Factor:
- E20+ ethanol-petrol blends: 8%
- Flex-fuel ethanol vehicles: 22.3%
- CNG: 5% or notified CBG blending percentage, whichever is higher
- Diesel receives a benefit linked to notified biofuel blending.
Automakers Can Trade Compliance Credits
Manufacturers exceeding their efficiency targets can generate credits, while those falling short accumulate debits. Credits can be traded between automakers or purchased from the Bureau of Energy Efficiency.
The BEE buyout price rises from ₹2,500/g CO2/km in FY28 to ₹4,500 in FY32.
Up To 9g/km Efficiency Benefit
CAFE III also allows manufacturers to claim 1g CO2/km for each eligible efficiency technology, capped at 9g/km. Technologies include regenerative braking, start-stop systems, tyre-pressure monitoring, efficient air-conditioning and advanced lighting.
The framework will operate in two compliance blocks: FY28-FY30 and FY31-FY32, while WLTP-based reporting will begin from April 2027.
