India’s car makers are deeply divided over a plan to ease emission rules for small cars under the upcoming CAFE norms. In a key vote by the Society of Indian Automobile Manufacturers, only two companies supported the idea, highlighting tensions as the government pushes for cleaner air while protecting affordable vehicles.
What Sparked the Division
The Corporate Average Fuel Efficiency norms, known as CAFE, set limits on carbon dioxide emissions for car fleets. The latest proposal for CAFE-3, set to start in 2027, includes relief for smaller cars to help them meet tough targets.
This comes as small car sales drop amid a boom in SUVs. Supporters argue that without exemptions, makers of entry-level models could face big fines or stop production. The Bureau of Energy Efficiency released a draft in September 2025, suggesting weight-based deductions like 3 grams per kilometer of CO2 for petrol cars up to 909 kg.
Opponents worry this could slow the shift to greener tech. The vote happened on November 7, 2025, during a SIAM meeting, with results sent to officials the next day.
Key Players and Their Stances
Maruti Suzuki and Renault voted yes for the exemption. Maruti, India’s top small car seller, says current rules favor heavier vehicles like SUVs, which get easier emission targets due to their size.
Toyota aimed for consensus, while Mercedes-Benz stayed neutral. The other 15 firms, including Tata Motors and Hyundai, voted no. Tata’s leaders claim relaxing rules for light cars might cut safety features to save weight and costs.
This split shows broader industry rifts. Small car backers hold about 49 percent of the market, but most makers focus on pricier models.
- Maruti Suzuki: Pushes for fair rules to keep small cars affordable.
- Renault: Supports as it sells compact models in India.
- Tata Motors: Opposes, warning of safety risks.
- Hyundai: Against, favoring equal standards for all.
Government Role and Proposed Changes
Officials have signaled support for small cars, seeing them as key for mass mobility. The plan offers CO2 cuts for small petrol vehicles and incentives for hybrids and flex-fuel engines.
A table below outlines main proposals in the CAFE-3 draft:
| Category | Relief Type | Details |
|---|---|---|
| Small Petrol Cars | CO2 Deduction | Up to 3 g/km for vehicles under 909 kg and 1,200cc engine |
| Hybrids | Super Credits | Extra credits for strong hybrid models to offset fleet emissions |
| Flex-Fuel | Incentives | Bonus for cars running on multiple fuels like ethanol blends |
| Overall Target | Emission Cut | Fleet average to drop to 71.5 g/km by 2032, a 63% reduction |
These changes aim to balance emission goals with industry needs. Yet, commercial vehicle groups want their own exemptions, saying their trucks have low impact.
The government plans a final decision soon, after reviewing feedback. This follows penalties in 2023, when firms like Hyundai and Mahindra faced fines over 7,300 crore rupees for missing targets.
Impact on Buyers and the Market
For consumers, easier rules could keep small cars cheap, vital in a country where many families rely on them for daily travel. Prices might stay low, but critics say it delays the push for electric vehicles.
The auto sector, worth billions, faces upheaval. Small car sales fell in 2025 as buyers shifted to SUVs, but supporters hope relief revives the segment.
If norms tighten without exemptions, makers might hike prices or cut models. This ties into global trends, like India’s EV import duty cuts for firms building local plants.
Experts predict more hybrids before full EV adoption. Recent events, such as fines on diesel-heavy firms, show enforcement is ramping up.
Broader Environmental and Economic Effects
Stricter CAFE rules aim to curb India’s rising pollution from vehicles. The country targets net-zero emissions by 2070, with transport a big emitter.
Economically, the divide could spark lobbying and policy tweaks. Small cars support jobs in manufacturing hubs, while SUVs bring higher profits.
The proposal motivates cleaner tech, like better engines or biofuels. But some fear it biases against innovation in heavier vehicles.
As debates heat up, the outcome will shape India’s auto future, blending green goals with growth.
What do you think about this industry split? Share your views in the comments and pass this article to friends interested in cars and the environment.
