India just wrote a rulebook for the next decade of cars — and buried a loophole big enough to drive an SUV through.
The CAFE III draft, out July 16, wants to cut average vehicle emissions from 113 gCO2/km to 77 gCO2/km by FY2031-32.
Sounds bold.
Stay with me though.
Not the coffee kind.
Corporate Average Fuel Efficiency — a rule born in the US after the 1973 oil shock, forcing automakers to average out fuel efficiency across their whole fleet, not just one model.
It made Japanese small cars a global force.
Later, it became the world's favorite tool to force EVs into showrooms.
China's version — the Dual Credit System — is brutally simple.
Miss your EV quota? Buy credits from a rival who has surplus. No shortcuts.
The result:
That gap is the whole story.
India's draft lets laggard manufacturers simply buy their way out.
Miss your target? Pay the Bureau of Energy Efficiency ₹2,500 per gram of CO2/km in FY2028, rising to ₹4,500 by FY2032.
For context, actual non-compliance penalties under law work out to roughly ₹5,000+ per gram.
So the buyout is priced at less than half the real penalty.
Add super-credits for hybrids and ethanol blends still stuck at E20, plus multi-year averaging windows — and suddenly "77 gCO2/km" gets a lot softer.
Automakers have already voluntarily committed to ~20% EV share by 2030, some chasing 30%+.
The new regulation effectively asks them for half of what they've already promised themselves.
India imports most of its crude oil.
Every geopolitical flare-up hits at the pump.
Public feedback on the draft closes August 6, 2026 — before it locks in from April 2027.
The window to tighten this is still open.
Whether India uses it… will decide if this is a climate policy, or just paperwork.
That's all for now!
