New CAFE 3 proposal to relax emission norms for small cars

The Bureau of Energy Efficiency (BEE) has unveiled a revised draft of the Corporate Average Fuel Economy (CAFE) 3 norms. The proposal aims to make the average CO2 emissions stricter from April 2027. The draft also provides relief for sub-4m petrol cars and incentivises electric vehicles along with range-extender hybrid electric (REE) vehicles.

1. Draft proposes CO2 emissions limit of 71.5g CO2/km in the coming years
2. It intends to incentivise manufacturers to produce multiple hybrid powertrain models   

CAFE 3 draft proposal explained

Draft proposal recommends average CO2 cut over a period of years

Last year's initial draft proposed to reduce the average CO2 emission limit under CAFE 3 at WLTP (Worldwide Harmonized Light Vehicle Test Procedure) to 91.7g CO2/Km. The current limit is 113g CO2/Km according to CAFE 2 norms. 

Under the newly revised draft proposal, the average CO2 emission limit will be significantly reduced, starting at 88.4 g CO2/km in the first year. This will be followed by a series of progressively tighter targets in the following years, up to 71.5g. However, the new draft proposes that sub-4m petrol (<1200cc, <909kg) vehicles can claim an additional reduction of 3.0g CO2/km in their manufacturer-declared CO₂ performances.

New Cafe 3 proposal credit system explained

Proposal to incentivise car makers to bring more hybrids

The draft proposes a credit system that could help manufacturers to offset the impact of models with higher emissions. This is by giving extra “weight” to electric, range-extender hybrids, flex-fuel ethanol and strong hybrid vehicles. These credits are multipliers applied to vehicle types when calculating a manufacturer’s corporate average CO2 performance.

The below table explains how many credits will differently powered vehicles will obtain:

Currently brands like Maruti Suzuki are developing their own strong hybrid powertrains for future models. Smaller models like the Fronx will get a series hybrid powertrain coupled with the Z12E three-cylinder petrol engine.

Mahindra, on the other hand, are exploring hybrid options on ICE and EV platforms. While ICE platform vehicles in their range will come with series hybrid powertrains, EV platform-based models could be powered by a range-extender hybrid setup.

The draft also proposes that manufacturers can form compliance pools of up to three OEMs. Each pool will be treated as a single entity for regulatory purposes, with its fleet-average CO2 emissions calculated from the combined sales of all member companies. A designated pool manager will be responsible for any penalties if the group fails to meet the emission standards.

The proposal aims to encourage companies to produce and sell a mix of vehicles that includes fuel-efficient options such as electric vehicles and hybrids to offset the higher emissions from larger, less efficient models. The more fuel guzzling models a company sells, the more fuel-sipping or zero-emission cars it needs to sell to meet its required fleet-wide average.