India has finalized sweeping new fuel-efficiency rules requiring automakers to cut fleet emissions from 2027. The Corporate Average Fuel Economy-III rules will progressively tighten limits through March 2032, demanding a 17% improvement in fleet-wide fuel efficiency over five years. This shift targets the world’s third-largest auto market, where rising SUV sales have complicated fuel consumption efforts. Rather than dictating technology, the regime forces manufacturers to manage entire portfolio emissions—balancing SUVs, small cars, hybrids, and EVs. India’s approach borrows from Europe’s fleet-based system but allows a more gradual transition with extra credit for cleaner vehicles and emissions credit trading. Rajat Mahajan of Deloitte India noted adherence will require careful planning and substantial investment. Automakers exceeding targets can generate and trade credits; those falling short may carry deficits or purchase credits to avoid penalties without immediate product overhauls.

The system grants flexibility through compliance periods and credit trading, unlike the EU’s steeper reductions. Manufacturers must now strategically align product mixes—prioritizing EVs, hybrids, and efficient gasoline models—to meet evolving standards while leveraging carbon credit markets for compliance.