CAFE Norms 2027: Why India’s Car Industry is Fighting Over Small-Car Incentives

CAFE Norms 2027: Maruti Suzuki vs Tata, Hyundai, M&M fight over 909-kg small car CO₂ relaxation. Will India’s cheapest hatchbacks survive or get safer & costlier?

Table of Contents

The Bureau of Energy Efficiency’s (BEE) draft CAFE-3 norms (effective 1 April 2027) have triggered one of the fiercest lobbying battles in India’s automotive history. At stake is a special 3 g/km CO₂ relaxation for petrol cars weighing ≤909 kg — a rule that could decide the future of ₹4–6 lakh entry-level hatchbacks.

What Are CAFE 3 Norms 2027?

Corporate Average Fuel Efficiency (CAFE) regulations force every carmaker to meet a fleet-wide CO₂ target.

CAFE-2 (till 2027): ~113 g/km
CAFE-3 (2027–2032): Targets expected to tighten to ~80–85 g/km by 2032

To comply, companies must sell more EVs, strong hybrids, CNG cars, or ultra-efficient petrol models — or face steep penalties.

The Controversial 909-kg Small Car Incentive

The September 2025 revised draft gives petrol cars that meet all three criteria below an extra 3 g/km CO₂ relaxation:

Kerb weight ≤ 909 kg
Engine ≤ 1,200 cc
Length ≤ 4,000 mm

In practice, only Maruti Suzuki (Alto K10, S-Presso) and Renault Kwid dominate this micro segment.

The Big Divide: Two Camps, One Battle

Camp 1: Keep the Relaxation (Maruti Suzuki + Renault)

Without relief, sub-₹6 lakh petrol cars will become unviable and disappear.
Hurts first-time and rural buyers.
Maruti’s Rahul Bharti: “Some competitors are pushing unscientific norms to kill affordable mobility.”

Camp 2: Scrap the 909-kg Rule (Tata, Hyundai, Kia, M&M, MG)

On 8 December 2025, top executives of these five companies held a late-night meeting with Union Minister Nitin Gadkari and demanded removal of the clause. Their arguments:

Unfair advantage to just 1–2 players
Promotes unsafe cars: Current 909-kg models have 0–2 star Global NCAP/Bharat NCAP ratings
- Maruti S-Presso: 0 star
- Alto K10: 2-star adult, 0-star child
- Renault Kwid: 1–2 star
Contradicts Bharat NCAP and upcoming safety regulations
Punishes companies that invested billions in safer, heavier platforms and EVs

Minister Gadkari has promised to take their concerns to the next inter-ministerial meeting (expected Jan–Feb 2026).

Possible Outcomes of Final CAFE-3 Rules

Outcome	Who Wins	Chance (Dec 2025 view)
909-kg clause completely removed	Tata, Hyundai, Kia, M&M, MG	Very High
Relaxation reduced to 1.5–2 g/km	Compromise	Medium
Switch to <4 metre (GST-based) definition with lower incentive	Maruti + some Hyundai/Tata models	High
No special relaxation; only EV/hybrid credits	Pure EV & strong hybrid makers	Medium

What It Means for Car Buyers from 2027

Cheapest petrol hatchbacks (Alto, Kwid, S-Presso) could rise ₹50,000–1 lakh or be discontinued
Safer, slightly larger cars (Tata Tiago, Hyundai Grand i10 Nios, Punch petrol) may become relatively more attractive
Faster push toward CNG, small EVs (Tiago EV, MG Comet), and hybrids