No relief likely for small cars in CAFE-III

The Bureau of Energy Efficiency (BEE) has presented a roadmap for the corporate average fuel efficiency (CAFE-III) norms to the Prime Minister's Office, which does not incorporate a regulatory relief for small cars. This approach is in contrast to several major automobile markets, where regulators soften emission tightening for very small cars. The proposed CAFE-III norms set a target for carbon dioxide emissions measured in grams per kilometre (g CO₂/km), and carmakers must ensure that the sales-weighted average emissions of the vehicles they sell remain below this limit.

Fuel-efficiency regulations typically use a weight-based formula, where heavier vehicles are allowed slightly higher emissions while lighter vehicles face tighter limits. However, regulators in several markets stop tightening the target beyond a certain point for very small cars, known as flattening the emission curve.

The BEE presentation cited examples of flattening mechanisms already in place in China, South Korea, and the United States. These mechanisms provide a regulatory headroom for very small vehicles, effectively treating them as if they weigh a benchmark when calculating emission targets. For instance, an entry-level car weighing around 735 kg would be treated as weighing about 1,090 kg under China's system, translating into an emission target of roughly 73 g CO₂/km.

Industry estimates suggest that such flattening mechanisms provide double-digit relief for small cars, with a cushion of around 13-18 g CO₂/km in various markets. India's proposed framework currently offers no comparable relaxation, which manufacturers of entry-level vehicles say is necessary because small cars are already among the most fuel-efficient vehicles in the market and offer limited scope for further emission reductions without significant cost increases.

Without some form of regulatory cushion, manufacturers of small cars say that meeting the proposed emission targets could require expensive technologies such as hybrid systems, potentially pushing up the price of the most affordable cars and narrowing the entry-level segment.