New vehicle fuel rules set strict targets for Indian carmakers from 2027

New Fuel Rules

The Ministry of Power has notified new Corporate Average Fuel Economy norms for passenger vehicles, effective from April 1, 2027, through March 31, 2032. The rules apply to all new passenger vehicles manufactured or imported for sale in India, tightening the fuel-consumption benchmark from 3.996 litres per 100 km in 2027-28 down to 3.3273 litres per 100 km by 2031-32. This marks a reduction of approximately 16.7 percent in fuel consumption across the period.

Compliance Pathways

Manufacturers must meet fleet averages rather than targets for individual cars. The framework raises the reference weight from 1,082 kg to 1,229 kg, easing demands on lighter vehicles while putting stricter requirements on heavier models. Companies can earn super credits using battery electric vehicles, range-extended EVs, plug-in hybrids, strong hybrids, and flex-fuel vehicles. A new Carbon Neutrality Factor also recognises low-carbon fuels like ethanol-blended petrol, biofuels, and compressed biogas.

Technology and Trading

The list of approved fuel-saving technologies expands from four to 12, covering additions like solar-reflective paints and high-efficiency air-conditioning. Each technology grants a concession of 1 gram of CO2 per kilometre, up to a total cap of 9 grams per kilometre. Carmakers can operate across two- or three-year compliance blocks, banking, trading, or buying credits through the Bureau of Energy Efficiency. Testing will use both the Modified Indian Driving Cycle and the Worldwide Harmonized Light Vehicles Test Procedure, with small-scale makers selling under 1,000 units annually remaining exempt.

Industry Reactions

Toyota welcomed the multi-technology approach, stating that combining efficient hybrids with electrification and local biofuels helps cut imported fossil fuel dependence. Tata Motors Passenger Vehicles MD and CEO Shailesh Chandra also welcomed the announcement, saying the mix of strict targets and market mechanisms provides the regulatory clarity needed to plan investments and accelerate innovation.

Context

Corporate average fuel economy regulations force carmakers to steadily lower the overall fuel consumption and emissions of the vehicles they sell rather than penalising individual high-consumption models. Such frameworks are widely used by governments to drive the adoption of electric vehicles and fuel-saving technologies without directly banning conventional engines. For car buyers, these rules gradually reshape showroom lineups toward more efficient options over time.