Copyright © HT Digital Streams Limited All rights reserved. The Society of Indian Automobile Manufacturers (Siam) is preparing to raise these concerns with the Union ministry of heavy industries, which oversees India’s EV incentive schemes. (HT) Summary India’s automakers are pushing for easier fuel efficiency rules, more EV credits and softer annual targets, even as policymakers weigh climate goals against industry competitiveness. NEW DELHI: India’s auto industry is pushing the government to ease fuel efficiency rules and extend incentives for electric vehicles (EVs), even as it remains divided over concessions for small cars. The negotiations could shape the country’s vehicle mix, technology investments and competitiveness for the next decade. Automakers are particularly upset about the September draft of the corporate average fuel efficiency (CAFE) rules, which tighten efficiency targets, set annual improvement milestones and revise incentives across powertrains, including EVs, hybrids and flex-fuel vehicles. The Society of Indian Automobile Manufacturers (Siam) is preparing to raise these concerns with the Union ministry of heavy industries, which oversees India’s EV incentive schemes, according to two people familiar with the discussions. Stricter fuel efficiency norms are pushing car manufacturers towards cleaner technologies and helping to reduce emissions. However, the pace and design of the targets may have implications for vehicle costs, product cycles and the competitiveness of domestic manufacturers during the global transition. A key industry demand is additional “super credits” for zero-emissions vehicles and a re-examination of annual fuel efficiency targets, which carmakers argue are too steep and operationally unviable, said one of the people quoted earlier. Industry fault lines The car industry itself is divided over proposed relaxations for small cars weighing less than 909kg and less than four meters in length. These concessions disproportionately benefit Maruti Suzuki, India’s largest carmaker by sales, whose portfolio is dominated by compact models such as the Alto. Maruti Suzuki argued that the norms unfairly penalize small cars, which are inherently more fuel efficient than larger vehicles. However, other automakers have resisted special treatment, especially those that have invested heavily in larger and premium vehicles. The draft CAFE norms suggest a relaxation of up to 9 grams of carbon dioxide per kilometer for small cars when calculating fleet-wide emissions. “Small cars are one small issue, there are still multiple topics that need to be discussed and addressed when it comes to CAFE norms,” ​​the person quoted above said on condition of anonymity. “On the CAFE chart, small cars and even the recreations that are suggested to them make up a limited number of vehicles. There are still much heavier and more polluting vehicles that could be more fuel efficient,” the person said. Super credit debate Under the CAFE framework, cleaner vehicles are counted as multiples to incentivize their production. In its September CAFE-3 draft, the government proposed counting each electric vehicle sold as three units, strong hybrid flexible fuel and plug-in hybrid vehicles as 2.5 units, strong hybrids as two units, and flexible fuel ethanol cars as 1.5 units. Earlier, in June 2024, the Bureau of Energy Efficiency (EBE) proposed more generous credits—five units for hydrogen fuel cell vehicles, four for EVs, two for plug-in hybrids, 1.2 for strong hybrids and 0.95 for flex-fuel ethanol vehicles. The industry argued that the revised September proposal significantly lowers the incentives for EV adoption. Email queries to the Ministry of Heavy Industries, Minister HD Kumaraswamy’s office and to Siam remained unanswered. The second person quoted above, also speaking on condition of anonymity, said a meeting between Siam, ministry officials and the minister is on the agenda. Queries sent to Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Hyundai and Kia also remained unanswered. Annual targets concern The September draft also introduces annual fuel efficiency improvement targets for the first time, which has emerged as another flashpoint. “The annual targets will be difficult to implement for the industry as significant improvement can be made every year. It becomes difficult to manage investments, for all manufacturers using different technologies, if these annual targets are set,” said an industry executive, requesting anonymity. According to the proposal, car manufacturers will have to reduce fuel consumption per 100 km from 3,726 liters in 2027 to 3,013 liters by 2032. To be sure, CAFE norms are notified by the Bureau of Energy Efficiency (BEE) within the Union Ministry of Power, with the Ministries of Heavy Industries and Road Transport and Highways. A second operations executive said on condition of anonymity that the CAFE targets are too steep, and that it is not possible to increase the efficiency of engines within the given time frame. Other options, such as increasing the share of electric or hybrid models in a manufacturer’s fleet, will depend on consumer acceptance of these emission-reduction technologies, the CEO said. CAFE 3 norms will be implemented for five years starting in April 2027. They require automakers to improve fuel efficiency across their fleets, not just individual models. By setting limits on a company’s sales-weighted average CO₂ emissions, the norms push manufacturers to produce and sell more fuel-efficient cars, including electric and hybrid vehicles, to balance the emissions of larger, less efficient models. Expert Views “Stylish CAFE targets play an important role in shaping the long-term direction of the automotive sector, but their ultimate effectiveness depends on how well ambition is balanced with market feasibility,” said Saket Mehra, partner and automotive and EV industry leader at Grant Thornton Bharat. The proposed norms call for a 63% improvement in fuel efficiency compared to CAFE-2, “putting significant pressure on product development cycles, supply chains and capital planning,” Mehra said. “The challenge really lies before the regulator and the line ministries, and not so much for the industry,” says Sharif Qamar, associate director of transport and urban management at The Energy and Resources Institute (Teri). “This is especially true in light of what is happening in the European market where the policy makers have fallen for the requests of the OEMs – which will have a huge negative impact on their manufacturing competitiveness vis-à-vis non-European OEMs, especially the Chinese,” he said. OEMs are original equipment manufacturers. European regulators relaxed their green policies on Tuesday, abandoning a proposal to ban all cars powered by fossil fuels from 2035 following pressure from the region’s auto industry, news agency Reuters reported on December 16. “This rigor is crucial to aligning India’s automotive sector with global decarbonisation pathways and ensuring competitiveness in markets where efficiency standards are becoming increasingly stringent,” Mehra added. Small-car slowdown To be sure, India’s compact car segment has shrunk sharply. Sales declined from 4.6 lakh units in FY19 to 1.52 lakh units in FY24 and further to 1.33 lakh units in FY25. “Given that India’s small car segment – once the backbone of mass market mobility – has experienced a sharp decline over the past six years, such calibrated regulatory support becomes even more critical,” Mehra said. Still, Qamar argued the framework remains fair. “KAFE regulation has been strict at the industry level but accommodating at the individual OEM level… It has in fact rewarded the OEMs and improved their overall image in the market by introducing efficient cars,” he said. Get all the automatic news and updates on Live Mint. Download the Mint News app to get daily market updates and live business news. more topics #electric vehicles #EVs #SIAM #Auto #carbon emission Read next story