CAFE III proposes to materially raise the bar on fleet-average emission thresholds, with stringent norms, especially in the latter years.

OEMs would need to balance technology upgrades, EV push and credit mechanisms to manage compliance. Aggregate fuel saving potential of around Rs. 38,000 crore estimated over the CAFE III period on account of improved fuel consumption standards.

Exhibit: Trend in India CAFÉ phase wise CO2 targets (g/km)

Source: Bureau of Energy Efficiency (BEE), Ministry of Power, Government of India, ICRA Research; Assumptions - Weighted average unladen mass for industry assumed at 1,229 kg; emission limits calculated from annual fuel consumption standard prescribed using standard petrol CO2 conversion factor