Tighter CAFE norms may soon leave carmakers no option but to make more EVs

BENGALURU: The government is looking to tighten the corporate average fuel economy (CAFE) norms, in a bid to push automakers to incrementally increase production of electric vehicles by 2-3% every year.

This is a more gradual effort after its efforts to make vehicle manufacturers reduce the number of vehicles powered by internal combustion engines (conventional vehicles) through limits on their production faced stiff resistance from the industry. “Electric mobility will only be adopted if it makes commercial sense, but we (the government) can do our bit to steer it in that direction,” a senior government official told ET.

CAFE is the average fuel efficiency of all vehicles produced by a manufacturer in a given period, taking into consideration the sales volume of each model. The government expects that a strict CAFE target will provide incentives to auto makers to produce and sell more EVs, to improve their average fuel efficiency. “From the manufacturers’ side, if we tighten the CAFE norms, they will be forced to produce 2-3% electric,” the official, who is in the know of the matter, said on condition of anonymity.


Since several automakers have already achieved their average fuel consumption target, the official said that by tightening the norms, auto makers will have to indirectly invest in EVs, rather than make production of EVs mandatory.

The government has reduced its aggressive initial target of getting aggregators to make 40% of their fleet electric by 2026, the official said. “Aggregators will be asked to procure EVs as part of their new fleet additions, and this could be in 2% increments (annually),” said the official. “This is the vision, but we understand that the reality is India needs more buses, but not necessarily electric buses.”

Stringent CAFE norms have been one of the most effective ways to push electrification globally, with great successes seen in places such as California, which has among the highest density of electric vehicles globally.Experts said India had a real chance to learn from the rest of the world about what works and what does not in promoting EVs. “India seems to be taking lessons from the rest of the world. We’re beginning to see that electrification happened the most where CAFE has been the most rigorous,” said Vinay Piparsania, Consulting Director at Counterpoint Research. “The only reason why automakers will make the urgent electric push is if there’s a penalty or a punitive cost, otherwise they would much prefer to maintain status quo.” The government had earlier mooted the idea of banning all three-wheelers with combustion engines by 2023 and twowheelers with engine capacity less than 150 cc by 2025. It later cancelled that plan after lobbying from the automobile industry.

(With inputs from Nehal Chaliawala in Mumbai)