New fuel efficiency norms by BEE likely to make your next car purchase more expensive

Automakers in India are facing a significant challenge as they are required to cut carbon emissions by a third over the next three years under the latest iteration of corporate average fuel efficiency (CAFE) norms.

These norms have been developed by the Bureau of Energy Efficiency (BEE), which oversees energy efficiency and conservation efforts in India. The enforcement of these stricter standards is expected to lead to higher car prices, compounding the 30 per cent price increase that followed the transition to Bharat Stage VI emission norms in April 2020.

An industry executive emphasized the difficulty of this task, noting that while developing low-emission vehicles is essential, these vehicles must also be priced affordably to ensure consumer uptake. If low-emission vehicles are too expensive, they will not sell, thereby failing to improve the company’s CAFE score.

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Industry stakeholders have been invited to submit their feedback by the first week of July, after which the BEE will review the inputs and finalize the guidelines. The CAFE 3 norms are set to take effect from April 2027.

BEE has proposed new targets under CAFE 3 and CAFE 4 norms, with limits set at 91.7 grams of CO2 per kilometre and 70 grams of CO2 per kilometre, respectively, based on the World Harmonised Light Vehicles Testing Procedure (WLTP).

Although there is some relief for automakers, as the transition period to CAFE 4 norms has been extended to five years from the initially proposed three, the new standards remain stringent. This extended timeline aims to provide automakers with sufficient time for product planning, development, and investment.

Post-March 2027, fuel consumption readings are expected to be higher when determined under WLTP compared to the Modified Indian Drive Cycle (MIDC).

The CAFE norms apply to a company’s entire vehicle production, limiting carbon emissions from the total number of vehicles sold in a financial year. Non-compliance with these set limits will result in stiff penalties, compelling manufacturers to produce more fuel-efficient vehicles.

According to the proposal, if the average fuel efficiency of cars sold by a manufacturer exceeds the limit by up to 0.2 litres per 100 kilometres, the penalty will be ₹25,000 per vehicle. If it exceeds by more than 0.2 litres per 100 kilometres, the penalty will rise to ₹50,000 per vehicle.

This regulatory push underscores the Indian government’s commitment to reducing carbon emissions and promoting green mobility, despite the significant challenges and financial implications for the automotive industry.