India’s manufacturers are currently facing a critical challenge: the implementation of more stringent carbon emission regulations. The new CAFE requirements, which are pushing the market for more fuel-efficient cars, are directly responsible for these laws, which call for a 30% decrease in emissions in just three years.
The Bureau of Energy Efficiency (BEE) is expected to propose the third iteration of the Corporate Average Fuel Efficiency (CAFE) standards, which will have a substantial effect on India’s automobile sector. Currently, there is pressure on automakers to cut carbon emissions by a third over the next three years or risk facing harsh fines. Although the goal of these new laws, which go into effect in April 2027, is to improve energy efficiency and lessen environmental impact, the auto sector will face several difficulties as a result of them.
The succeeding CAFE 4 rules aim for a tougher limit of 70 grams of CO2 per kilometer, while the CAFE 3 norms set a target of 91.7 grams. The five-year transition period to CAFE 4 standards allows automakers more time to adjust. The government’s comprehension of the industry’s apprehensions and dedication to enabling a seamless shift is evident in the extension.
The adoption of these strict guidelines is not without its difficulties, though. Since the Bharat Stage VI emission standards were adopted in April 2020, the industry has already seen a 30% spike in pricing. Nowadays, automakers have to do a careful balancing act between creating low-emission cars and making sure their prices are reasonable enough to draw in customers.
CAFE standards restrict the amount of carbon emissions from all automobiles sold in a company’s fiscal year and are applicable to the entire vehicle production process. Significant fines for noncompliance are applied, with the goal of pressuring automakers to build more fuel-efficient vehicles. A automaker faces a fine of ₹25,000 per vehicle if its average fuel efficiency is higher than 0.2 liters per 100 kilometers. Should the amount surpass this benchmark by over 0.2 liters per 100 kilometers, the fine doubles to ₹50,000 for each car.
The success of this endeavor is critical, as one industry executive notes, because a low-emission vehicle that is not priced competitively will not find a buyer and will have a negative effect on the company’s CAFE score.
Industry officials raised doubts about the possibility of achieving these lofty goals, even with the extension to CAFE 4 standards.
According to a senior executive, the government has decided to extend the transition to CAFE 4 by up to five years, although the goals set forth are challenging. In addition to having to lower fuel and carbon emissions for the whole fleet within the next three years, automakers will also have to measure these metrics in accordance with WLTP.
