The government’s new Corporate Average Fuel Economy (CAFE-III) norms have provided the automobile industry with a clearer framework for technology investments, according to industry representatives. The framework seeks to balance environmental objectives with flexibility for manufacturers while encouraging the adoption of flex-fuel vehicles and biofuels.

Society of Indian Automobile Manufacturers (SIAM) President Shenu Agarwal said the five-year framework would give automakers greater predictability to plan investments and accelerate innovation. He said the regulation established annual targets through a market-based compliance mechanism and would help reduce fuel consumption from new passenger vehicles while allowing companies to pursue different technology pathways.

Mahindra President, Automotive Business, Velusamy R said the framework balanced environmental requirements with what was achievable for the industry and would also strengthen India’s energy security. He highlighted compliance blocks, technology credits, cleaner-fuel benefits and super credits for electric vehicles and other advanced technologies as provisions that could support manufacturers in meeting the targets.

The new CAFE norms will take effect on April 1, 2027, and target a 16.7 per cent improvement in passenger vehicle fuel efficiency by 2032. The framework recognises alternative fuels and cleaner technologies, including ethanol-blended petrol, biofuels, electric vehicles, hybrids and flex-fuel vehicles (FFVs), while setting a trajectory through 2031-32.

All India Distillers’ Association President Vijendra Singh said the framework could strengthen the relationship between India’s ethanol industry and clean mobility. He said recognition of ethanol and FFVs through a 22.3 per cent Carbon Neutrality Factor and a 1.1x super-credit would improve policy visibility for biofuels. Singh added that vehicle availability, fuel infrastructure and consumer awareness would be needed to expand the FFV ecosystem and translate India’s ethanol capacity into wider clean mobility adoption.