India’s largest carmakers are expected to turn to hybrids to comply with tough corporate average fuel efficiency norms (CAFE-3). The shift comes as the Centre continues to push long-term electrification
CAFE-3 norms, set to begin in April 2027, aim to tighten fleet-wide emission standards and reduce average carbon dioxide emissions to around 71.5 g/km by 2032. To meet these targets, automakers must significantly increase production of electric and hybrid vehicles, as the norms penalise high fuel-consuming fleets while offering “super credits” for cleaner powertrains.
Automakers are likely to adopt a dual strategy, improving efficiency of petrol portfolios while increasing hybrid production, potentially leading to a spike in hybrid vehicles.
Automakers are implementing this dual-track approach to meet immediate demand for fuel-efficient, lower-emission options, while continuing long-term EV investments as infrastructure matures.
BEE estimates strong hybrids, battery EVs, plug-in hybrids, range-extended EVs (REEV) and strong hybrids with flex fuel will together form a growing share of the PV market by FY32. Strong hybrids are expected to have the highest share, followed by EVs.
New Regulation create Caution Among Carmakers
Given the strict fines under the new norms, the regulator is being cautious. There is uncertainty as EV penetration could range between 15–20% in the period.
CAFE-3 norms are aimed at delivering progressive reductions in fleet-average CO₂ emissions through market-driven changes in vehicle sales mix, alongside regulatory compliance mechanisms.
Top carmakers have ambitious EV targets for the next five years. Maruti Suzuki aims for 15% EV share by FY31; Tata Motors and M&M target 30% by 2030; Hyundai Motor India targets 17%.
However, hybrids are expected to play a critical role. Hyundai plans around eight hybrids by 2030, while Renault is preparing a strong hybrid variant of its SUV Duster.Automakers including Kia, JSW MG Motors, Honda, Maruti and Toyota will have hybrid vehicles in their portfolios.
Incentives for hybrids have been a contentious issue. Japanese automakers have lobbied for concessions such as lower taxation, direct subsidies, or waiver of state and central fees. However, domestic carmakers Tata Motors and Mahindra have opposed such incentives, arguing they could slow pure EV adoption.
