India's Draft CAFE-III Norms Tighten Fuel Efficiency Targets for Cars from 2027 to 2032

India's Ministry of Power has released a revised draft of the CAFE-III fuel efficiency norms for passenger vehicles, set to take effect from April 1, 2027. The new rules tighten fleet-average targets from 3.996 litres per 100km (94.76 gCO2/km) in FY2028 to 3.3273 litres per 100km (78.90 gCO2/km) by FY2032. Compliance will be assessed in two blocks, a three-year block followed by a two-year block, giving automakers a phased timeline to adapt. For the first time, the draft introduces Carbon Neutrality Factors that recognize ethanol, biofuel, and Compressed Bio-Gas as carbon-neutral, allowing reductions in declared tailpipe CO2 before compliance checks. Manufacturers can also claim up to 9 gCO2/km in benefits for approved fuel-saving technologies like start-stop systems and regenerative braking. The buyout price for compliance credits starts at Rs 2,500 per gCO2/km in FY2028 and rises to Rs 4,500 by FY2032. The norms retain super credits for battery electric vehicles, plug-in hybrids, and flex-fuel vehicles. Manufacturers selling fewer than 1,000 passenger vehicles annually remain exempt. The public comment period ends August 6, 2026.