New fuel-efficiency norms for Indian carmakers set to begin in April 2027

Fleet Targets

India's passenger vehicle manufacturers will face tighter fuel-efficiency standards from April 1, 2027, under the final Corporate Average Fuel Economy-III framework. These rules, notified by the Ministry of Power, apply to M1 category vehicles until March 31, 2032, and judge carmakers on their entire vehicle portfolio rather than individual models.

Weight Formula

The compliance targets use a fleet-wide calculation based on the weighted average unladen mass of sold vehicles, with a reference weight fixed at 1,229 kg. The baseline fuel-consumption target and weight adjustment factor change annually to make the standards progressively stricter over the five-year period, shifting from 3.996 litres per 100 km in fiscal year 2028 to 3.3273 litres per 100 km by fiscal year 2032.

Powertrain Benefits

Battery-electric vehicles and range-extended electric vehicles receive the largest boost with a volume derogation factor of three, while plug-in hybrids and flex-fuel strong hybrids get 2.5, strong hybrids receive 1.6, and flex-fuel vehicles get 1.1. The final framework drops a previously proposed special concession for petrol cars weighing under 909 kg after extensive industry debate.

Credits And Context

Manufacturers can trade compliance credits, carry them forward, or buy them from the Bureau of Energy Efficiency starting at Rs 2,500 per gram of CO2 per km in fiscal year 2027-28, rising to Rs 4,500 by fiscal year 2031-32. Small-volume makers producing fewer than 1,000 eligible vehicles are exempt from the specific targets, though they must still report fuel consumption.

Context

Corporate Average Fuel Economy regulations are policy instruments used by governments worldwide to lower overall transport emissions and curb oil consumption over time. By targeting fleet averages rather than single models, these frameworks give carmakers the flexibility to offset heavier gas-guzzling vehicles with cleaner electric or hybrid options.