The debate over India’s upcoming CAFE-3 (Corporate Average Fuel Efficiency) emission norms has intensified, with Kia India formally writing to the Prime Minister’s Office (PMO) to oppose a proposed weight-based exemption for small petrol cars. The move places Kia alongside JSW MG Motor India and Tata Motors Passenger Vehicles, deepening divisions within the domestic automobile industry.
Industry sources confirm that Kia sent its representation last week, raising serious concerns over a draft proposal that would allow additional emission relaxations for petrol cars weighing below 909 kilograms. Automakers opposing the move argue that such an exemption could undermine the core purpose of CAFE norms—reducing carbon emissions and accelerating the shift toward cleaner mobility.
Why Kia Is Opposing the CAFE-3 Proposal
In its letter to the PMO, Kia has argued that CAFE regulations are designed to drive fleet-wide emission reductions, not to create carve-outs based solely on vehicle weight. The company warned that introducing a special category for ultra-light petrol cars could dilute incentives for manufacturers to invest in electric vehicles (EVs), hybrid technologies, and fuel-efficient innovations.
Kia further cautioned that a weight-based relaxation risks distorting competitive neutrality by offering selective advantages to a narrow segment of the market, rather than encouraging industry-wide technological progress.
Concerns Over Redefining ‘Small Cars’
Another key issue flagged by Kia is the redefinition of small cars. For nearly two decades, India has classified small cars based on engine capacity and vehicle length, parameters that have guided long-term investments, localisation strategies, and product planning.
Shifting to a weight-based definition at this stage, Kia argued, could introduce regulatory uncertainty, disrupting future investments and increasing compliance complexity for manufacturers who have structured their portfolios around existing norms.
GST Incentives Already Exist, Kia Notes
Kia also pointed out that small petrol cars already enjoy significant tax benefits under the GST regime. Vehicles under four metres in length with engines up to 1,200 cc attract 18% GST, compared to 40% GST on larger petrol cars.
Given these existing fiscal incentives, Kia questioned the necessity of extending further relief under emission norms, especially when India is aiming to align its automotive policies with climate commitments.
Allegations of Uneven Market Advantage
The automaker further warned that the proposed exemption could disproportionately benefit a single manufacturer, estimated to hold nearly 95% market share in the sub-909 kg petrol car category. While the company did not name the player, the concern has amplified industry fears of policy-driven market imbalance.
Such a move, Kia said, could weaken confidence in regulatory fairness and discourage broader innovation.
What Are CAFE-3 Norms?
CAFE norms mandate that automakers meet fleet-wide average CO₂ emission limits, measured in grams per kilometre (g/km). Companies failing to comply face penalties imposed by the Bureau of Energy Efficiency (BEE) under the Ministry of Power.
First draft of CAFE-3 (FY28–FY32) released: June 2024
SIAM feedback submitted: December 2024
Revised draft (September 2025): Proposed 3 g/km relaxation for petrol cars under 909 kg
However, SIAM later acknowledged that no consensus exists among member companies on the exemption.
Global Context and What Lies Ahead
Maruti Suzuki has argued that without relief, ultra-light petrol cars could become economically unviable, calling the targets “unreasonable.” It also pointed to Europe, where incentives for compact vehicles can reach up to 18 g/km.
In contrast, the European Commission recently announced “super credits” for compact electric vehicles, reinforcing a policy push toward EVs rather than extending concessions to internal combustion engines.
As India moves closer to finalising CAFE-3 norms, policymakers face a complex balancing act—cutting emissions without distorting competition or slowing innovation. The outcome will significantly shape the future of India’s passenger vehicle market in the next decade.
