Small car manufacturers received some relief with the Bureau of Energy Efficiency (BEE) draft rules on fleet-wide emissions, which offer lighter penalties for compact vehicles. Cars under four meters, weighing less than 909 kg, and powered by engines below 1200 cc will get a 3-gram advantage per kilometer when calculating carbon dioxide (CO2) emissions under the new Corporate Average Fuel Efficiency (CAFE 3) regulations. This benefits Maruti Suzuki, which advocated for its small cars like the Alto and Wagon-R, although the exemption isn’t as extensive as requested. The benefit caps at 9g per km over five years.
CAFE norms require automakers to improve fuel efficiency across their fleet, encouraging sales of electric and hybrid vehicles to offset emissions from larger models. With small car sales declining sharply—from 460,772 units in FY19 to 133,397 in FY25—this relief, along with recent GST cuts from 28% to 18% on cars under 4 meters, may revive interest in smaller vehicles. Experts expect manufacturers to increase small car production and boost electric vehicle offerings to comply with stricter fuel consumption targets set from 2027 to 2032.
