Maruti, Tata, Mahindra agree on emission relief for small trucks, rift remains on small cars

The agreement, reached late last month within the Society of Indian Automobile Manufacturers (Siam), brings Maruti Suzuki, Tata Motors, and Mahindra & Mahindra on the same page for the first time on Constant Speed Fuel Consumption (CSFC) norms, according to two people aware of the discussions.

Automakers plan to request the government to exempt SCVs from these fuel-efficiency requirements under the Bureau of Energy Efficiency (BEE) framework.

The new alignment among automakers gives the government room to move forward on finalizing fuel-efficiency rules for commercial vehicles, factoring in industry feedback. A consensus on SCVs is significant because the segment—where sales fell 2% in FY25 to 582,852 units—largely serves small businesses and last-mile operators. Any exemption from the upcoming norms would spare automakers from having to adopt costly clean-fuel technologies, which are currently much pricier than traditional internal combustion engines.

What the CSFC norms mean

The CSFC standards are a new version of emission and fuel efficiency norms for commercial vehicles, designed to ensure manufacturers improve mileage and reduce CO₂ output across fleets. The final draft, released by BEE on 28 July, proposes that the rules apply to light, medium, and heavy commercial vehicles—that is, N1, N2, and N3 categories—starting April 2027.

“Passenger cars (M1 Category) are already regulated under the Cafe standards, but LCVs below 3,500 kg gross vehicle weight (GVW) remain unregulated," the BEE had noted in its draft notification. “Regulating LCVs will aid decarbonization and reduce fuel costs for small businesses."

However, automakers argued that extending the same stringency to small commercial vehicles—typically used by small businesses, self-employed owners, and last-mile delivery operators—could make them prohibitively expensive.

“Transport is a vital component of this ecosystem. Although trucks comprise only about 3% of the vehicle fleet, they account for roughly 44% of total transport-related greenhouse gas emissions, over 50% of particulate matter (PM2.5) emissions, and more than 40% of nitrogen oxide (NOx) emissions," said Amit Bhatt, managing director at the International Council for Clean Transportation (ICCT).

"In calendar year 2024, 8.34 lakh trucks were sold, of which 56% belonged to the N1 category. Therefore, it is imperative to establish efficiency targets for N1 category trucks as well," said Bhatt.

Why automakers want relief

Tata Motors and Mahindra & Mahindra led the push for exemptions, arguing that SCVs serve economically weaker sections and operate in price-sensitive segments. Any move to mandate new fuel-efficient or clean technologies could raise costs significantly.

Maruti Suzuki, which joined the proposal later, supported the idea of limited regulation for SCVs, citing weak demand trends.

The auto industry had missed the initial 30-day window to respond to the draft CSFC norms due to a lack of consensus, leaving the BEE awaiting their response before the norms could be finalized. The new agreement now paves the way for Siam to send a consolidated response to the government, potentially speeding up finalization.

Small cars remain a sticking point

While the industry is aligned on SCVs, deep divisions persist on small cars under the Corporate Average Fuel Efficiency (Cafe) III norms—also due for implementation from April 2027.

The first draft of Cafe III, released in June 2024, was met with resistance from automakers, who collectively warned in December that its targets were “too aggressive" and could threaten industry sustainability. However, the fragile consensus cracked earlier this year when the government began considering a relaxation for small cars.

Maruti Suzuki has argued that tightening fuel-efficiency targets could make small cars unaffordable for first-time buyers, further eroding a segment that has already shrunk sharply. Small hatchbacks—once half of India’s car market—now account for about a quarter, with sales falling 13% year-on-year to around one million units in FY25, even as the overall passenger vehicle market grew 2%.

The company proposed a 20-gram relaxation in CO₂/km targets for small cars, but the final draft grants only a 3-gram advantage, executives said. Maruti maintains that small cars, like SCVs, serve lower-income consumers and should be treated similarly under emission rules.

Tata Motors and Mahindra & Mahindra have opposed any special dispensation, arguing it would undermine India’s decarbonization goals and distort fair competition.

“Companies would look to present their individual cases to the government if Siam is not able to come to a final consensus soon, as everyone wants to conclude the finalization of norms quickly to prepare plans for the future," the second executive said.

The road to consensus

The lack of consensus within Siam has already delayed industry feedback on the Cafe III draft released by BEE on 25 September, which gave automakers 21 days to respond. Because Siam requires full consensus for any official decision, the deep disagreement over small cars has prevented the body from submitting a unified response.

“Unless there’s full consensus, companies may have to approach the government individually," said one executive aware of the matter.

During Mahindra & Mahindra’s earnings call on 4 November, executive director Rajesh Jejurikar said that discussions on Cafe III are still ongoing and that consensus could take “a couple of weeks." However, other industry officials said a breakthrough is unlikely soon given entrenched positions.

Both CSFC and Cafe III norms are crucial to India’s 2030 decarbonization roadmap, which targets lower fleet-level fuel consumption and CO₂ emissions. For now, though, the industry’s halfway agreement leaves one half of the road still uncertain.