Knowledge Nugget | CAFE-III norms: What are the new rules and how will they work?

On April 1, 2027, India will implement new Corporate Average Fuel Economy (CAFE) norms designed to improve fuel efficiency and reduce greenhouse gas emissions from passenger vehicles. These CAFE-III norms, effective until March 31, 2032, set progressively stricter fuel efficiency targets for manufacturers.

Manufacturers must meet fleet-wide fuel consumption targets, calculated based on the weighted average unladen weight of the vehicles they sell. Vehicles meeting certain fuel efficiency technologies, such as Battery Electric Vehicles (BEVs), Plug-in Hybrid Electric Vehicles (PHEVs), and Flex-Fuel Vehicles, receive additional incentives called "super credits."

To meet the targets, manufacturers can choose from two-year or three-year compliance blocks. They can carry over credits from one block to the next or trade credits with other manufacturers. This flexibility allows manufacturers to adopt cleaner technologies and innovative solutions at their own pace, while still contributing to India's overall fuel efficiency goals.