Automakers with maximum fleet of alternative fuels to benefit in CAFE-III

The Ministry of Power (MoP) on Thursday released draft Corporate Average Fuel Economy 2027 Norms (CAFE-III) and sought suggestions from stakeholders in the next 21 days, after which the said draft CAFE 2027 will be taken into consideration

Automakers with the maximum number of fleets in alternative fuel options will benefit the most under the CAFE-III norms. While newcomers such as JSW MG Motor India and VinFast will also benefit under the regulations, companies such as Renault India and Nissan Motor may suffer a bit on meeting the emission targets.

safeguards

But such companies can still have safeguards because of the super carbon credits that they can purchase from the Bureau of Energy Efficiency (BEE), as per the policy, industry sources told businessline. “As per the draft policy, automakers that exceed emission reduction targets will be allowed to trade surplus carbon credits with manufacturers that fall short, subject to mutually agreed terms, so it is a win-win policy for all. OEMs who don’t meet the targets can purchase the credits from another OEM or BEE,” said an industry executive requesting anonymity.

The Ministry of Power (MoP) on Thursday released draft Corporate Average Fuel Economy 2027 Norms (CAFE-III) and sought suggestions from stakeholders in the next 21 days, after which the said draft CAFE 2027 will be taken into consideration, said the MoP.

According to another industry executive, companies such as Renault India and Nissan Motor India can partner to get the carbon credits since they don’t have other alternative fuel or electric vehicle (EVs) are not available in their fleet as of now. Companies such as Honda Cars India are safe because they have strong electric hybrid in their portfolio, the executive added.

However, Renault India has plans to launch strong-hybrid vehicles by end of this year, and the company also plans to launch seven new vehicles by 2030, including electrified powertrains. But Nissan’s current focus remains on internal combustion engine (ICE) vehicles, while it continues to evaluate hybrid and other technologies with its teams in Japan and India. The company also noted that it has to buy the hybrid system at a higher cost and the additional expense would inevitably be reflected in the final price to the customers.

Thierry Sabbagh, Divisional Vice-President and President - Middle East, KSA and India, Nissan Group AMIEO, said recently: “We will introduce the right solutions when market conditions are appropriate...Nissan also has global expertise in flex-fuel technologies. We work closely with policymakers to understand future regulatory requirements, and will bring the appropriate technologies to market when needed.”

The draft CAFE-III proposes manufacturer specific annual average fuel consumption standards that will continue to be determined on the basis of the weighted average unladen mass of vehicles sold during each reporting year. The proposed framework provides differentiated carbon neutrality factors (CNFs) for renewable fuel blending such as ethanol, CBG and bio-fuel based on notified blending percentages. Small volume manufacturers below 1,000 number annual sales will remain exempted from fleet-average obligations, it added.

Meanwhile, according to Grain Ethanol Manufacturers Association (GEMA), as India moves towards higher ethanol blends and the gradual adoption of flex-fuel vehicles, policy measures such as CAFE-III will help create a supportive ecosystem for expanding the use of domestically produced renewable fuels.

“By recognising the carbon reduction potential of ethanol and other renewable fuels, the government has reinforced the need for a technology-neutral approach to decarbonising the transport sector. This provides greater policy visibility to industry, encourages long-term investment and complements India’s broader energy security and climate objectives,” said CK Jain, President, GEMA.

Published on July 17, 2026