Revised CAFE-3 draft tightens norms, may hit small carmakers India News

NEW DELHI: Small carmakers may face greater regulatory challenges if the draft amendments to CAFE-3, which proposes to improve vehicle fuel efficiency and reduce carbon emissions, are implemented. People involved in the deliberations said the latest proposed changes would support larger vehicles, particularly electric and hybrid electric vehicles.With the Corporate Average Fuel Efficiency (CAFE) issue still unresolved amid a tussle among carmakers, the Prime Minister’s Office has intervened in the matter and persuaded the Ministry of Petroleum and Heavy Industries and the Ministry of Road Transport and Power to finalize the norms. This is the third draft of CAFE-3 in the past two years.CAFE refers to government-regulated standards that set minimum average fuel efficiency and maximum carbon dioxide emission levels for the entire fleet sold by automakers. Rather than examining individual models, it measures a weighted average of all cars produced by the manufacturer.

Under the latest draft of CAFE-3, which is yet to be released, the Bureau of Energy Efficiency (BEE) proposes to remove derogations (additional subsidies) or exemptions for small car manufacturers. It has launched range-extended electric vehicles (REEVs) with the same volume derogation factor (VDF) of 3 as electric vehicles. The VDF is a targeted government measure aimed at boosting sales of less polluting vehicles such as electric vehicles, REEVs and hybrids.People familiar with the latest changes said the removal of the small car derogation is expected to increase the price of entry-level gasoline cars. They added that the introduction of REEVs was driven by the current low penetration of EV charging infrastructure, buyer anxiety over range and uncertainty over battery life.There is debate over whether REEVs are treated the same as electric vehicles because, unlike electric vehicles, these vehicles produce tailpipe emissions when their engines are running.People familiar with the proposed policy said the gap in people switching from two-wheelers to cars is likely to widen as carmakers will no longer produce small cars that meet CAFE-related regulatory norms.Industry executives say the cost of new cars under the proposed CAFE-3 regime will increase by about 10% under the draft standards, as automakers must add more fuel-saving technology to meet the new standards or face penalties.