Carmakers on edge over delays in notification of tougher emission norms

With the Centre not yet notifying the third iteration of the corporate average fuel efficiency or CAFE-III norms—CAFE-I and CAFE-II were notified 24 months in advance—carmakers are feeling the pressure to prepare their fleet and powertrain plans to deliver the largest mandatory emissions cut over any five-year period.

Under the proposed norms, automakers would need to bring average emissions of their fleets to 88.4gm CO₂/km by March 2028, a 21% cut from 113gm CO₂/km currently.

This also means they need to make plans for their fleets to be close to the 88.4gm CO₂/km target even at the start of the cycle—in April 2027—to be able to meet the average in a year’s time.

Further, by March 2032, their fleets will need to cut emissions by 37% (from current) to 71gm CO₂/km by March 2032.

As the days pass, carmakers are getting edgy.

“I am confident that the CAFE-III notification should come out in the near future. We are very close to 2027, and yes, it would be a concern if it were delayed any further. But I believe the government is cognizant of this concern," Vikram Gulati, executive vice-president for corporate affairs and governance at Toyota Kirolskar, told Mint.

Škoda Auto India brand director Ashish Gupta said policy certainty is critical for long-term investment planning. “These are not small investments that you make. You always make investments with a horizon of at least a decade and a half in mind. So more policy clarity, of course, is necessary and is a precondition for any investment decisions," Gupta said.

“(At the same time,) with the kind of uncertainty existing globally, in terms of geopolitics, economic ups and downs, and how the markets are playing out, I think it is very difficult to assume that we will always have 100% policy clarity," he added.

Another industry executive, speaking on condition of anonymity, warned that further delays could render the compliance window unfeasible. “We are expecting a final notification by the end of January, so that we would have time to comply. But there has been no clarity on this yet," the executive said.

Earlier, on 31 July 2025, Rahul Bharti, senior executive officer-corporate affairs at India’s largest carmaker Maruti Suzuki, said during the company’s June quarter earnings call: “It is expected that between one to two months, all of us are hoping, the final regulation will be out so that we have clarity for the powertrains starting from 1 April 2027."

What makes CAFE-III more stringent is the Centre’s plan to empower the Bureau of Energy Efficiency (BEE), under the power ministry, to directly penalize carmakers for non-compliance.

The delay in notifying the norms follows sharp divisions among automakers over potential relaxations for small cars, even as global think tanks have pushed back against proposals to offer additional concessions for electric vehicles (EVs) through supercredits.

The ministries of power, heavy industries, road transport and highways, the BEE and Maruti Suzuki did not respond to Mint’s emailed queries.

Not an easy task

Analysts say several automakers face steep challenges.

Analysts at Kotak Institutional Equities wrote in an 8 January note that while Tata Motors and M&M have an edge in meeting the norms due to EV sales lead, Maruti Suzuki and Hyundai Motor have their task cut out.

“Maruti Suzuki faces moderate near‑term requirements, but significantly tougher 2032 obligations, owing to its higher reliance on its small-car portfolio, necessitating accelerated hybrid and BEV deployment. Hyundai Motor appears most exposed, with low current electric penetration and a delayed mass‑market EV pipeline," Kotak Institutional Equities’ Rishi Vora and Apurva Desai wrote in the note.

“There is always a case for a long-term regulatory roadmap for the auto industry. Ideally, a three-year window to prepare for norms will help in increasing competitiveness," said Ashim Sharma, senior partner and group head at think tank Nomura Research Institute. “More time to prepare for such norms will help the industry."

There is, however, disagreement on whether the notification delay materially hurts readiness. Sharif Qamar, associate director at Teri (The Energy and Resources Institute), said automakers were aware of the 2027 timeline and should have prepared accordingly. “The delay in final notification is primarily due to the negotiations and revisions," Qamar said.

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The long road

Automakers have nevertheless begun working on clean-fuel strategies. Tata Motors Passenger Vehicle Ltd and Mahindra & Mahindra (M&M) Ltd plan to achieve 30% EV penetration over the next five years, while Maruti Suzuki India Ltd and Hyundai Motor India Ltd are targeting EV shares of 15-17% over the same period.

Industry executives, however, have said earlier that a final notification is needed to finalize key product decisions. For instance, greater relaxations for EVs through supercredits could alter the future powertrain mix.

Maruti Suzuki, India’s largest carmaker, is also closely tracking whether the government will offer any relief for small cars. In December, the company had warned that CAFE-III targets could be “unscientific" for small cars and may force the company to discontinue such cars to meet emission standards.

Mint’s emailed queries to Hyundai Motor India, Tata Motors Passenger Vehicle and M&M also remained unanswered till press time.

Earlier norms

The previous norms were activated in good time. The first set of CAFE norms was notified by the power ministry in April 2015, outlining the emission-calculation formula and targets applicable from April 2017 to March 2022, with an average emission limit of 130 gm of CO₂ per km.

The same notification also laid out targets for CAFE-II, which ran from April 2022 to March 2027, giving automakers a seven-year lead time. Under CAFE-II, the maximum average emission target was tightened by 13% to 113gm CO₂/km.

Nehal Chaliawala in Mumbai contributed to this story