Corporate Average Fuel Efficiency (CAFE-III) Norms
The government has introduced draft norms for the third edition of Corporate Average Fuel Efficiency (CAFE-III), applicable from FY28 to FY32, sparking debate within the Indian automobile industry.
Purpose and Impact
- CAFE-III Norms: Set stricter fleet-wide carbon-dioxide emission targets for manufacturers of passenger vehicles.
- Increased Investment: Manufacturers need higher investment in better-designed parts and components to meet the new targets.
- Electric Vehicles (EVs) Incentive: EVs will count as "super credits," encouraging carmakers to transition to zero- or low-emission vehicles, such as hybrids.
Controversy
- Disproportionate Costs: The norms impose higher costs on small cars compared to larger cars and SUVs.
- Emission Reduction:
- Lighter cars (900 kg) must reduce emissions by 27%.
- Heavier cars (1,500 kg) must reduce emissions by 22%.
- Proposed Relaxation: An exemption for small cars has been proposed, causing division within the industry.
Urban Management Perspective
- Traffic and Pollution: Narrow tax differentials and consumer trends towards compact SUVs have contributed to traffic congestion and pollution.
- Tax Reduction Impact: A pre-Diwali GST reduction on small cars led to a moderate increase in sales, highlighting consumer trends.
Safety Concerns
- Weight-Based Exemption Risks: May encourage manufacturers to compromise on safety components.
- Safety Standards: Cars meeting safety standards are mostly SUVs and their compact variants.
Recommendations
- Recalibration of Incentives: Encourage manufacturers to focus on electric or hybrid hatchbacks and sedans rather than offering weight-based exemptions.
