CAFE-III 2027: What car buyers need to know

India's passenger vehicle industry is set to implement new Corporate Average Fuel Economy (CAFE-III) norms starting April 1, 2027, with a deadline of March 31, 2032. These rules apply to M1 category passenger vehicles manufactured or imported for sale in India, and aim to improve fleet-wide fuel consumption. Automakers have several options to meet their targets, including credit trading, incentives for electric and hybrid vehicles, carbon-neutrality factors for certain fuels, and discounts for fuel-saving technologies.

For electric vehicles (EVs), battery electric vehicles and range-extended electric vehicles receive a volume derogation factor of 3.0, while plug-in hybrids and strong hybrids using flex-fuel ethanol receive factors of 2.5 and 1.6, respectively. Flex-fuel ethanol vehicles receive a 1.1 factor, and CNG vehicles receive a 1.0 factor. Strong hybrid vehicles receive a 1.6 factor. The overall aim is to incentivize the use of cleaner powertrains to meet the fleet-wide efficiency requirements.