In CAFE 3, auto cos have a better view of the road

India's recently announced CAFE 3 emission standards could reshape the automotive industry's focus on powertrain investments, favoring cleaner technologies such as hybrids, plug-in hybrids, range extenders, and ethanol-compatible vehicles alongside electric vehicles. By enabling multiple green technologies to generate compliance credits, the new norms could force automakers to reassess their product portfolios and investment strategies over the next five years, as companies face debits for non-compliance that can be traded or purchased.

This could be especially significant for companies like Tata Motors, Mahindra & Mahindra, and Vinfast, which have heavily invested in battery EVs and largely avoided hybrids, potentially disrupting their plans for pure BEV production. The framework offers different credit multipliers for various clean technologies, with battery EVs and range-extender EVs receiving the highest multiplier of 3, plug-in hybrids/strong hybrids receiving 2.5, strong hybrids 1.6, and flex-fuel ethanol vehicles 1.1.

Smaller efficiency technologies such as start-stop systems, tyre-pressure monitoring, regenerative braking, LED lighting, and efficient air conditioning can each reduce calculated emissions by 1 gram CO₂/km, with a total benefit cap of 9 grams CO₂/km. Automakers generally welcomed the new framework, with Maruti Suzuki acknowledging the recognition of multiple powertrain technologies and fuels, Tata Motors emphasizing the continued importance of electrification, and Mahindra praising the balance between environmental objectives and industry feasibility.