Government Notifies CAFE-3 Norms for Automakers, Retains EV Incentives

The new norms, notified by the Ministry of Power, will take effect from April 2027 and remain applicable until March 2032.

The final rules do not include a separate concession for petrol cars weighing up to 909 kg. A 3 grams per kilometre concession for such vehicles had been proposed in an earlier draft, but the provision faced opposition from several major automakers.

Instead, the government has modified the formula used to determine a manufacturer's fleet-wide carbon dioxide emissions target. The reference vehicle weight has been raised to 1,229 kg from 1,170 kg in the September 2025 draft, while the annual weight adjustment has also been reduced.

The changes are expected to provide relatively greater flexibility to manufacturers with lighter vehicle fleets, while imposing tighter targets on heavier vehicles.

Under the final formula, a vehicle weighing 909 kg will have an emissions target of around 82.8 grams of CO2 per km for FY28, compared with approximately 76 grams under the earlier draft. For a 2,500-kg vehicle, however, the target has been lowered to about 142.4 grams per km from around 151.4 grams under the previous formula.

The CAFE-3 framework also retains a super-credit mechanism aimed at encouraging the production and sale of cleaner vehicles. Under the system, one battery electric vehicle will be counted as three vehicles when calculating a manufacturer's fleet performance. The same three-times factor will apply to range-extended electric vehicles.

Plug-in hybrids and strong hybrids using flex-fuel will receive a 2.5-times factor, while strong hybrids will receive a 1.6-times factor. Flex-fuel vehicles will receive a 1.1-times factor.

The new rules also introduce a credit-debit mechanism for manufacturers. Companies that perform better than their prescribed emissions targets will earn credits, while those that fall short will accumulate debits.

The CAFE framework is intended to push automakers towards lower fleet-average carbon emissions while allowing manufacturers to meet the targets through a mix of vehicle technologies.