CAFE puzzle: Tailpipes must not get to wag India's car market

Mint

3 days ago

A controversy is raging in the Indian automobile industry over what India's new norms for Corporate Average Fuel Efficiency (CAFE) should be. Maruti Suzuki has said the current proposals are unfair to makers of small cars, while the rest of the industry—makers of bigger cars, mostly, including EVs—seems to support the CAFE-2 norms proposed for 2027-28 onwards and CAFE-3 five years later.
Whether India's largest carmaker expects special treatment for small cars (as with GST) or a correction of this policy designed to reduce carbon exhaust depends on what's at stake here. Since this is about a road traffic clean-up, it is hard to ignore a basic flaw in our CAFE norms: they do not take into account the number of people moved.
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Instead of splitting hairs over whether tailpipe exhaust targets should be adjusted, the government should create a new formula to replace what we have. As of now, the formula uses the average kerb weight of an automaker's vehicles for a per-kilometre emission goal to be achieved, but it should be replaced with the average number of passengers per kilogram of kerb weight for that company.
CAFE norms were invented in the West after the 1970s' oil shocks to restrain fuel use. Instead of specifying a fuel efficiency target for each car model, it set an average for all cars made by each maker—the 'Corporate Average' bit. Over time, they evolved to cover emissions and various countries adopted them, including India. An automaker's CAFE goal is set as follows: the industry-wide target multiplied by the average kerb weight of all types of vehicles rolled out, divided by the industry's average kerb weight. The ratio of a company's average kerb weight to the industry's is the key variable here.
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Maruti makes cars that are lighter on average than what others make. Since its ratio is less than one, the current formula gives it a steeper target. News reports suggest a proposal is being considered to let Maruti go by a normatively higher average kerb weight than its actual figure. This is not right.
To set the policy straight, we must go back to the whiteboard and take into account the overarching fact that the purpose of cars is to transport people. What matters thus is the emissions per person moved. For the total tonnage of its fleet, an automaker that rolls out a large proportion of small cars would move more people per kilogram of average curb weight, assuming a common occupancy rate per vehicle for the industry.
It may even turn out that small cars carry more people per car, given that those who buy larger cars tend to be relatively well-off and belong to households with multiple vehicles. But going by common occupancy is enough to serve the purpose.
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Yet, taking passengers into the calculus is not enough to account for the entire carbon footprint of vehicles—reducing which is also important. While there are other issues that must be tackled to strengthen climate action, such as EVs using electricity that's likely to be spewing carbon at the generation end behind the power grid, not to mention the pollution of battery production, that point is crucial because big cars have a larger footprint.
Any CAFE norms tilted against a maker of small cars would incentivize climate-unfriendly size enlargement across a fleet. While it is true that the Indian market has been shifting towards larger cars anyway, we shouldn't let policy distort it further in that direction.