Setback for Maruti Suzuki as India drops small car concessions in CAFE-III norms

India has scrapped a planned concession for small cars in upcoming fuel-efficiency rules after automakers including Tata Motors Ltd. and Mahindra & Mahindra Ltd. argued it would benefit only one company—Maruti Suzuki India Ltd., a government document shows.

Maruti Suzuki controls 95% of India's small car market. (HT Auto)

A September 2025 draft of the Corporate Average Fuel Efficiency-III, or CAFE-III, norms had proposed leniency for petrol cars weighing 909 kg or less—a carve-out widely seen as favouring Maruti Suzuki, which controls 95% of India's small‑car market. India's power ministry has now removed that exemption and tightened other parameters, increasing pressure on all automakers to ramp up electric and hybrid car sales, according to the latest 41-page draft reviewed by Reuters.

The new CAFE-III norms curb over-compensation for vehicle weight, aim to level the field between light and heavy fleet manufacturers, and are designed to deliver real-world efficiency gains, the document states. They introduce "a substantially steeper reduction pathway" for emissions.

The power ministry did not respond to a request for comment.

CAFE-III norms dictate permissible CO2 emissions across a manufacturer's fleet of passenger cars weighing less than 3,500 kg. Updated every five years, they push automakers towards cleaner technology including electrification, compressed natural gas and flex-fuel.

The new rules will apply from April 2027 for five years and are central to auto makers' product and powertrain investment plans. It was not immediately clear when the rules will be finalised.

The September draft would have allowed fuel-consumption targets to rise faster with vehicle weight, easing compliance for makers of heavier cars such as M&M, Tata Motors and Volkswagen, while tightening demands on lighter-fleet players such as Maruti. That imbalance prompted the carve-out. The revised plan reduces the extent to which heavier vehicles gain more relaxed targets.

"Manufacturers with heavier fleets... are required to achieve stronger intrinsic efficiency improvements," the document said.

A credit system will reward companies that sell more EVs and plug-in hybrids, and pooling of fuel-consumption performance between companies will be allowed. Non-compliance will draw penalties of up to $550 per car.

The revised plan aims to cut average fleet emissions to about 100 grams/km over the five years to March 2032 from 114 grams/km. With credits, that could fall to as low as 76 grams/km if electric models reach 11% of total car sales by 2032.