CAFE III emission targets to disrupt PV market trends 2027 onwards: Chandra

Shailesh Chandra, managing director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, said that CAFE III standards, which will hit the industry around 2027

Tata Motors, the leader in the passenger electric vehicle space with a 70 per cent market share, expects the upcoming Corporate Average Fuel Efficiency (CAFE III) standards that are slated to be unveiled by April 2027, will be disruptive for the passenger vehicle (PV) market in India and challenging for automakers.

Shailesh Chandra, the managing director of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, said CAFÉ III standards will be significantly more stringent than CAFE II where certain original equipment makers (OEMs) were able to meet the norms with zero or even low penetration of battery electric vehicles (BEVs).

“However, in the new norms, it will become extremely difficult, if not impossible to comply without BEVs in the mix. Or else, the companies will face significant penalties and also will face the risk of adverse impact on the brand image,” Chandra said.

He expects that in the next 5-6 years, the mix of CNG and EVs will see a significant rise in the volumes. “Beyond 2027, the trend will be steeper because of this regulation,” he added.

CAFE III standards that are likely to be implemented from 2027-2032, propose carbon emission targets of 91.7 gm CO2 per km, and 70 gm CO2 per km for CAFE IV norms based on the World Harmonized Light Vehicles Testing Procedure (WLTP). 

The CAFE norms apply to an OEM’s entire vehicle output, limiting carbon emissions from all vehicles sold in a financial year. 

These new norms will increase the prices of internal combustion engine (ICE) vehicles. Prices of vehicles have been on the rise as such. 

“Even currently, when the average prices of cars are much higher than in the past, the demand is at a peak – registering 4.3 million in FY24. This is also because disposable incomes have increased. Therefore, in a market with only 32-cars-per-thousand penetration, there is huge scope,” Chandra said.

He added that the Indian PV industry is expected to touch 6 million units by FY30, growing at a 6 per cent CAGR.

Tata Motors is targeting an 18-20 per cent market share by FY30, and is trying to increase its addressable market by introducing new nameplates.

It currently addresses 53 per cent of the total industry volumes (TIV) in which it enjoys a 26 percent share. It is targeting to have a portfolio that addresses 80 percent of TIV by FY30.

In FY25 Tata Motors is launching the Harrier EV, the Currv EV and ICE variants, the CNG Nexon, and most of it in the second half of the year.

Chandra said they are trying to strengthen their multi-powertrain offerings as the industry will gravitate towards greener powertrains (EVs and CNG).

It expects CNG penetration to reach 25 percent by FY30 and EV penetration to touch 20 per cent by then.

“We are proactively driving the mainstreaming of EVs with an ecosystem approach to address the barriers to adoption,” he said, adding that they will strive towards acquisition price parity of EVs versus ICE vehicles and at the same time address range anxiety (one of the key barriers) with higher range vehicles.

Prices of ICE vehicles will rise, while EVs will fall in the coming years.

“Emission norms will keep increasing the price of ICE vehicles, whereas there is a secular reduction in the battery prices that we have been seeing for a period of time. So ICE will see an inflationary trend, the EVs will see an inflationary trend. So, the gap will narrow,” Chandra added.

“We are also going to look for cross-promotion between rooftop solar charging and EVs through a bundled offering for the customers, which will be a win-win for all parties,” he added.