No consensus on CAFE relief, Siam tells Bureau of Energy Efficiency

Says 3-4 carmakers backed proposed exemption, 14-15 opposed

5 min read Last Updated : Nov 10 2025 | 11:32 PM IST

The Society of Indian Automobile Manufacturers (Siam) submitted its final comments to the Bureau of Energy Efficiency (BEE) last weekend on the draft CAFE-III and CAFE-IV norms, acknowledging that its members could not reach a consensus on a proposed weight-based exemption for small cars, Business Standard has learnt.

The BEE had issued the revised draft on September 25, following which Siam held nearly 45 days of intense deliberations with its members. During these discussions, three to four carmakers supported the exemption, one remained neutral, while the remaining 14-15 opposed it, said sources familiar with the matter.

A sharp divide within the auto industry over this issue has persisted since the beginning of the year, with no resolution in sight. “In its submission to the BEE, Siam noted there were ‘mixed views’ on the exemption for small cars and has effectively left the final decision to the BEE,” a source mentioned.

The Corporate Average Fuel Efficiency (CAFE) framework sets average carbon-dioxide emission targets that each automaker’s fleet must meet, measured in grams of carbon dioxide emitted per kilometre (g/km) for every model sold. If a company fails to meet these targets, the BEE can impose stiff penalties.

In June 2024, the BEE had published the first draft of CAFE-III and CAFE-IV norms, which would apply from April 2027 to March 2037. Siam submitted its initial comments in December 2024, seeking several changes. A few months later, Maruti Suzuki — India’s largest carmaker and the biggest small-car seller — independently approached the BEE requesting relief for small cars through a weight-based exemption, marking the first signs of a divide within the industry.

In its revised draft issued on September 25, the BEE incorporated the weight-based exemption for the first time. According to the draft, petrol vehicles weighing up to 909 kg, with an engine capacity below 1,200 cc and a length under 4,000 mm, would get an additional 3 g/km deduction in their declared carbon-dioxide emission.

Siam did not respond to queries sent by Business Standard on the matter.

Notably, in its submission to the BEE last weekend, Siam said it had no objection to the reliefs proposed in the September 25 draft for flex-fuel vehicles and strong hybrid cars capable of running on flex fuels.

The industry body has taken a unified position on this, even though major electric vehicle (EV) makers had raised concerns over the past 45 days that the combined effect of the Volume Derogation Factor (VDF) and Carbon Neutrality Factor (CNF) allowed strong hybrids running on flex fuel to appear much closer to EVs in compliance calculations, despite their actual emission being higher.

Any fuel blend containing at least 85 per cent ethanol is considered “flex fuel”.

The VDF is a multiplier used to calculate a manufacturer’s fleet-average carbon-dioxide emission, allowing certain low-emission vehicles, such as strong hybrids or EVs, to be counted as more than one vehicle. This effectively lowers the fleet’s average emission on paper, making compliance easier.

The CNF is a percentage discount on declared emission based on fuel type, with flex-fuel or flex-fuel-compatible strong hybrids receiving up to a 22.3 per cent reduction. When the CNF relief is combined with the VDF, the reported carbon-dioxide emission of such cars falls further on paper, EV makers had argued.

Sources privy to the development said major EV makers, which had opposed the relief for flex-fuel and strong hybrid vehicles, wanted the industry to build a consensus on the issue and did not raise further objections in the final stages of deliberations.

Siam, in its recent submission, also supported the “pooling” provision introduced in the September 25 draft.

Under this provision, an automaker having difficulty in meeting CAFE targets would be allowed to form a pool with up to two other manufacturers. This gives flexibility in compliance but puts penalties squarely on the designated manager of such a pool if norms are not adhered to.

The move is expected to help companies with less fuel-efficient portfolios, such as those relying heavily on petrol- or diesel-run sports utility vehicles, as they can combine their performance with manufacturers offering greener vehicles, such as EVs. This is the first time such a provision has been introduced in the CAFE norms.