Don't run small cars off the road: Why India's emission rules hurt the cars we actually need

Economic Times

09-07-2025

Agencies Corporate Average Fuel Efficiency (CAFE) norms are back in focus - this time for what they leave out. The proposed CAFE 3, set for 2027-28, aims to cut passenger vehicle CO₂ emissions to 91-95 g/km from around 113 g/km under CAFE 2. But concerns are rising that stricter fleet averages could hurt small, fuel-efficient cars while favouring pricier models with electrified variants, undermining affordability and mass mobility.India's CAFE framework is based on older European models, which tightens CO₂ emission targets as the weight of the car decreases. This means larger, heavier vehicles - despite consuming more fuel and emitting more CO₂ - are given relaxed targets, while smaller and more fuel-efficient cars are saddled with disproportionately tighter targets.
This is in sharp contrast to how the rest of the world operates: US, China and South Korea follow a piecewise linear model, in which the line becomes horizontal for smaller, lightweight cars. Japan adopts a quadratic curve, which softens at the lower-weight range. Europe has corrected its mistake and now has a negative slope for the CAFE line, which means CO₂ targets for heavier, bigger cars are tighter than those for lighter, smaller ones. These regulatory structures are rooted in practicality, equity and environmental logic.India's contrary CAFE model can have serious on-ground implications. For many Indian households, a small car is not a luxury - it's a move toward dignity, convenience and road safety. A family using a two-wheeler bears the vagaries of weather. What they need is a four-wheeled solution that is covered, safe, reliable and affordable. With over 25 cr two-wheelers on our roads today, ensuring this shift is a national imperative. Two-wheeler riders account for 45% of road fatalities in India. A safe, affordable car could be life-changing for them - but is increasingly out of financial reach, with even the entry-level car price rising from about ₹2.5 lakh till about six years ago to about ₹5 lakh today.
It is not just about regulations but also about recognising the role small cars play in national development. Historically, in the journey of most nations transforming from developing to developed status, small cars have driven mass motorisation, expanded access to jobs and catalysed industrial growth. They offer a cleaner, safer and more inclusive form of mobility. Lightweight, fuel-efficient and less taxing on urban infrastructure, small cars have served not just individuals but the economy.
Unfortunately, India appears to be abandoning this path. Entry-level car sales have declined by 77% in the past eight years due to a combination of high taxation, rising insurance and compliance costs, and increasingly stringent regulations. With the proposed CAFE norms applying harsher targets to small cars, this segment risks further erosion. This is a systemic failure to safeguard equitable access to safe personal transport. We can think of modernising small cars, but we should never kill them. There's also an environmental contradiction at play. GoI's Mission LiFE initiative rightly emphasises mindful consumption, efficient use of resources and sustainable living. Small cars use fewer raw materials, consume less fuel, emit lower CO₂ and cause less wear on roads.India must adopt a regulatory and fiscal approach that recognises small cars as a distinct category - with lower taxation and easier compliance norms. If the regulatory burden continues to rise, we risk shutting out the majority of Indians from the mobility ladder.The objective of CAFE is to reduce fuel consumption and CO₂ emissions. But failing to protect vehicles that do both is not just ironic - it is environmentally and scientifically counterproductive.All OEMs must rise above individual commercial interests and support a regulatory course correction that serves the national interest. An insensitive approach to the mass segment cannot steer the future of India's mobility. It demands unified resolve, long-term thinking and policy alignment with the needs of our people.
The writer is former president, Society of Indian Automobile Manufacturers (Siam)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.) Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Newton vs. industry: Inside new norms that want your car to be more fuel-efficient
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