Corporate Average Fuel Economy (CAFE) III Norms to Regulate Vehicle Fuel Efficiency

Key facts

• The government is expected to notify the final Corporate Average Fuel Economy (CAFE) III norms by the end of May 2026.
• The Bureau of Energy Efficiency (BEE) is updating the compliance formula to shift the reference fuel from E20 to E25/E27 to align with India's ethanol roadmap.
• The CAFE III norms are scheduled for implementation starting from April 1, 2027.
• The framework aims to reduce dependence on imported crude, expand ethanol usage, and accelerate the adoption of cleaner technologies.
• The norms will determine compliance credits for battery electric vehicles, strong hybrids, and flex-fuel technologies.
• Indian automakers are preparing distinct strategies: Maruti Suzuki plans ethanol-compatible technology for high-volume models, Toyota Kirloskar Motor is combining flex-fuel engines with strong hybrids, and Tata Motors intends to launch flex-fuel technology around late 2026 or early 2027.