India's proposed CAFE-III fuel efficiency standards for passenger vehicles are projected to generate cumulative fuel cost savings of around Rs 38,000 crore between FY28 and FY32, according to ratings agency Icra. The third phase of Corporate Average Fuel Efficiency norms, effective April 2027, would tighten fleet-average CO2 targets by roughly 16% by FY28 and nearly 30% by FY32 compared to FY27 levels. The framework includes credit trading, fleet pooling, and stricter penalties to enforce compliance. Automakers will need to combine internal combustion engine technology upgrades with faster EV adoption to meet the targets while keeping vehicle price increases in check. The regulations support India's broader push toward an energy-efficient, lower-carbon vehicle ecosystem.
