CAFE 3 rules will come into effect for passenger vehicles from April 1, 2027, bringing stricter fuel economy and carbon emission targets for car manufacturers. The new rules will remain in force until March 31, 2032.
The main aim of the new regulations is to improve vehicle fuel efficiency and reduce pollution. Automakers will need to increase the share of fuel-efficient petrol and diesel vehicles along with EVs and hybrid models in their overall sales mix.
The tighter targets could also encourage manufacturers to introduce more affordable electric cars as companies compete to expand their EV portfolios.
CAFE 3 Rules Bring Stricter Targets
Under the existing CAFE 2 framework, which came into effect in April 2022, compliance is assessed based on the combined average of vehicles sold by a manufacturer rather than setting the same mileage requirement for every individual car.
The current framework uses an average vehicle weight benchmark of 1,082 kg. Based on this benchmark, manufacturers are required to achieve an average fuel economy of 20.92 km per litre, while average carbon emissions must remain below 113 grams per kilometre.
CAFE 3 will tighten these requirements. Manufacturers will have to bring their fleet’s average carbon emissions down to 91.7 grams per kilometre during the 2027-32 period.
This represents a reduction of around 19% from the current 113 grams per kilometre target. The fuel economy requirement will also become stricter over the five-year period.
Fuel Economy Target Will Rise Gradually
Under the new framework, manufacturers will need to achieve an average fuel economy of at least 25 km per litre in 2027. The target will become progressively stricter and is expected to reach around 30 km per litre by 2031-32.
These targets apply to a company’s overall fleet rather than requiring every petrol, diesel, hybrid or electric car to deliver the same mileage.
This means automakers can balance their vehicle portfolios by selling more fuel-efficient models, EVs and hybrid vehicles to meet the required fleet-average targets.
EVs and Hybrids Get Super-Credit Benefits
CAFE 3 also includes a super-credit mechanism for vehicles that offer lower emissions. Under this system, certain cleaner vehicles can receive higher credits when their sales are counted toward compliance.
Pure electric vehicles receive a three-times credit. This means 10,000 EV sales can be counted as 30,000 vehicles for the relevant calculation.
Plug-in hybrids and flex-fuel hybrids receive a 2.5-times credit, while strong hybrid vehicles receive a 1.6-times credit. Flex-fuel vehicles receive a 1.1-times credit.
The system gives manufacturers an additional incentive to increase sales of cleaner vehicles while working towards their fleet-average targets.
New Technologies Can Improve Petrol and Diesel Cars
CAFE 3 does not require manufacturers to rely only on electric vehicles. Petrol and diesel cars can also benefit from approved technologies designed to improve efficiency and reduce emissions.
These technologies include engine start-stop systems, tyre pressure monitoring systems, regenerative braking, higher-speed gearboxes and 12V or 48V alternators.
Other approved technologies include 12V or 48V motor-generators, LED lighting, advanced glazing, electric water pumps, high-efficiency air conditioning, solar-reflective paint and smart radiator fans.
These technologies can help reduce fuel consumption and energy use. The regulations allow manufacturers to gain benefits from such efficiency improvements while developing their overall vehicle strategy.
What CAFE Rules Mean for Car Buyers
CAFE, or Corporate Average Fuel Economy, is a regulatory framework used to control the average fuel consumption and carbon emissions of a manufacturer’s passenger vehicle fleet.
The calculation considers the combined performance of vehicles sold by a company rather than applying one fixed mileage requirement to every model.
As a result, a manufacturer selling small fuel-efficient cars, SUVs, hybrids and EVs can meet its overall target through the combined performance of its fleet.
The CAFE 3 framework is designed to push this average towards higher fuel efficiency and lower emissions from 2027 onwards.
The stricter requirements may encourage automakers to expand their affordable EV and hybrid offerings, while petrol and diesel vehicles may also receive more fuel-saving technologies.
