CITING GLOBAL TRENDS, NOMURA STUDY SAYS INDIA SHOULD RELAX EMISSIONS NORMS FOR SMALL CARS

India must “reform” its emissions norms, called the Corporate Average Fuel Efficiency (CAFE) framework, to align with global best practices by incorporating protection mechanisms for small cars, a new study by researchers at Nomura has said.

The study said that India follows a linear weight-based approach under its CAFE norms, “whereby a lower weight implies a more stringent target”. This, it said, was different from regulations in major automobile markets like the United States, China, European Union and Japan, where smaller, lightweight cars have relaxed emissions norms. In India, companies such as market leader Maruti Suzuki have been lobbying in favour of relaxed emission norms for smaller hatchback cars, a segment that is seeing declining sales.

“Globally, all major automotive markets including the US, China, Japan, Korea, and Europe offer regulatory protection to small cars under their CAFE frameworks due to their environmental and socioeconomic value,” the Nomura researchers said in the recent study.

“In contrast, India’s linear weight-based CAFE approach penalises lighter vehicles with disproportionately stringent CO₂ targets. This creates a structural bias where heavier vehicles with higher emissions comply easily, while small cars with lower emissions fail. Lightweighting, a key decarbonisation strategy, is thus disincentivised,” they added.

What are India’s CAFE norms?

The Bureau of Energy Efficiency (BEE) introduced the CAFE norms in 2017 to regulate fuel consumption and carbon emissions from passenger vehicles. These norms apply to vehicles running on petrol, diesel, liquefied petroleum gas (LPG), compressed natural gas (CNG), hybrids, and electric vehicles (EVs) weighing less than 3,500 kg. The norms were tightened in the beginning of financial year 2022-23, with increased penalties for non-compliance.

Designed to reduce oil dependency and curb air pollution, the CAFE norms push automakers to lower carbon dioxide emissions while incentivising the production of EVs, hybrids, and CNG vehicles, which are less carbon-intensive than cars that run on fossil fuels.

For 2022-23, the BEE, under the Union Ministry of Power, required car companies of all units sold during the year to achieve India’s Corporate Average Fuel Efficiency (CAFE) norms. This meant a fuel consumption of not more than 4.78 litres per 100 km and carbon dioxide emissions of not more than 113 grams per km (since it has a direct correlation with the amount of fuel consumed).

Nomura researchers said that under India’s emissions calculation system, the CAFE framework gives heavier vehicles more relaxed absolute CO₂ limits. A large SUV or premium car is allowed a much higher CO₂ target whereas smaller cars get a much more stringent target.

The graph above, prepared by Nomura researchers, shows that that one of the high-selling SUVs (represented with a green dot, Model A), having CO₂ emissions of about 130g/km, is compliant, whereas a high-selling small car (represented with a red dot, Model B) having CO₂ emissions of about 100g/km is non-compliant.

“One of the common strategies OEMs use to lower CO₂ emissions is reducing vehicle weight while maintaining the safety characteristics of the vehicle. But under India’s CAFE mechanism, lighter cars are assigned stricter absolute CO₂ targets. This means that even if a car becomes more efficient through lightweighting, it may still fall short of its now-lower target. As a result, the current framework does not adequately reward lightweighting, especially for already light, entry-level cars,” the study said.

How other markets temper norms for small cars

The researchers cited examples of the USA, China, Japan, South Korea and European Union to show that in these markets, regulators have prescribed relaxed emissions norms for smaller cars.

USA: Follows a piecewise linear approach for cars below a certain footprint, which ensures that the target does not keep on increasing indefinitely. This implies that fuel economy target below certain car footprint is fixed and does not become progressively stricter with further reduction in size, ensuring comparatively relaxed targets for smaller cars

China: Follows a similar piecewise linear approach, for cars below a certain curb weight threshold, the target becomes constant, which ensures that the fuel consumption target does not keep on tightening indefinitely for smaller, lighter cars.

South Korea: For cars below a certain curb weight, the fuel economy target remains constant, ensuring that smaller, lighter cars are not subjected to increasingly stricter targets as weight reduces. Further, manufacturers also get an additional advantage of 5–7g/km in their CAFE performance, based on the sales ratio of small cars in their portfolio.

Japan: Japan follows a non-linear approach, ensuring that small light-weight cars are not subjected to disproportionately higher targets.

Europe: It has gone a step ahead and made the slope negative (-0.0144) which means bigger cars have a lower absolute CO₂ target and smaller cars have relaxed targets.

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2025-07-04T10:58:39Z