CAFE III norms may slow India's EV shift, says Down To Earth

India's third round of corporate average fuel economy (CAFE) norms, proposed for 2026, may put the brakes on the country's electric vehicle ambitions. That's the argument in a Down To Earth report published on September 30, 2026.

The CAFE III standards set fleet-wide fuel consumption targets for carmakers. They are meant to cut emissions from new vehicles. But the way the rules are designed, they could favour incremental improvements to petrol and diesel engines over a full shift to electric.

How CAFE III works

Under CAFE norms, a carmaker's entire fleet must meet an average fuel efficiency or CO2 target. Companies can earn credits for selling more efficient cars, including EVs, and use them to offset less efficient models. The system is technology-neutral on paper.

In practice, the targets for CAFE III are seen as lenient enough that carmakers can comply by tweaking conventional engines, adding mild hybrids, or pushing small cars. They don't have to sell many battery-electric vehicles to stay within limits.

That's the crux of the Down To Earth analysis: the norms protect the status quo. They let the industry stick with internal combustion engines for longer, delaying the scale-up of EVs that India needs to meet its climate and energy security goals.

Why it matters for EV ambitions

India wants EVs to make up 30% of new car sales by 2030. That target is already steep. Automakers have been slow to launch affordable electric models, and charging infrastructure is still patchy.

Strong CAFE norms could force the issue. If the fleet average had to drop sharply, companies would need to sell more EVs quickly. But with softer targets, the pressure eases. The result: more petrol and diesel cars on the road, more oil imports, and more emissions locked in for years.

The report points out that other countries, including the European Union and China, have used fuel-efficiency rules to drive EV adoption. India's CAFE III, by contrast, may end up doing the opposite.

Industry pushback and policy trade-offs

Car manufacturers have argued that overly strict norms would raise costs and hurt sales in a price-sensitive market. They say the transition needs to be gradual, with government support for charging and battery manufacturing.

But critics counter that the industry has had years of warning. They say the real risk is that India misses its EV goals and remains dependent on imported oil.

The Down To Earth article doesn't offer a definitive fix. It lays out the tension: fuel-efficiency rules that are too weak won't cut emissions or spur EVs; too strong, and they could disrupt an already sluggish auto market.

What's clear is that CAFE III, as proposed, is unlikely to accelerate India's electric shift. It may do the opposite. The rules are still under discussion, and the final version could change. But as they stand, they look like a missed opportunity.