Tata Motors and Hyundai Clash Over CAFÉ Norms as Weight vs Price Debate Intensifies
India's automobile sector is witnessing a major internal dispute as manufacturers remain deeply divided over the framework for upcoming fuel efficiency regulations. The controversy centers on whether small car eligibility under the next phase of Corporate Average Fuel Efficiency (CAFÉ) norms should be based on vehicle weight or pricing considerations.
Market Split: Two Camps Emerge
The automotive industry has fractured into two distinct groups with opposing viewpoints. On one side, Maruti Suzuki, Toyota, Honda, and Renault — collectively commanding 49 percent of the passenger vehicle market as of September 2025 — are supporting a Bureau of Energy Efficiency (BEE) proposal that recommends weight-based relaxations for smaller vehicles.
However, major competitors including Tata Motors, Hyundai, and Mahindra & Mahindra have strongly objected to this approach. These manufacturers contend that using weight as the sole criterion could create market distortions and unfairly disadvantage companies operating in related vehicle segments.
The Core Disagreement
According to a senior executive from a leading automaker, consensus discussions within the Society of Indian Automobile Manufacturers (SIAM) have reached an impasse. "Few manufacturers have not agreed to a consensus on small cars. Among the various proposals discussed within SIAM, one relates to the price of the car for qualifying for the norms," the executive revealed.
Industry officials advocating for price-based criteria argue that affordability must be factored into the equation. They point out that the price differential between an average two-wheeler and entry-level four-wheeler stands at 3.5 to 4 times. Furthermore, they emphasize that lightweight construction doesn't automatically equate to affordability — several vehicles weighing under 909 kg carry price tags approaching ₹10 lakh.
Tata Motors Takes Strong Stand
Tata Motors has emerged as the most vocal critic of weight-based categorization. Shailesh Chandra, Managing Director and CEO of Tata Motors Passenger Vehicles, issued a clear rejection following the company's September quarter financial results.
"There has been an effort to define an arbitrary category of small cars based on weight. We will not support this," Chandra stated emphatically. "We have absolutely no concerns in meeting the CAFÉ norms even with a high share of small cars, and we see no justification for special concessions."
Safety Concerns at the Forefront
As India's second-largest producer of small cars with over 85 percent of sales coming from this segment, Tata Motors has raised critical safety concerns regarding the proposed weight relaxation framework. Chandra highlighted that no vehicle below 909 kg currently meets the Bharat New Car Assessment Programme (BNCAP) safety standards.
The company argues that encouraging lighter vehicle designs could reverse the significant safety improvements achieved by the Indian automotive industry over the past decade. Chandra emphasized that diluting emission standards based purely on weight compromises vehicle safety and diverts attention from the industry's broader goal of transitioning toward sustainable mobility solutions.
Impact on Major Manufacturers
The debate carries significant implications for market leader Maruti Suzuki, which maintains an extensive portfolio of sub-909 kg models. Popular vehicles in this category include:
- Wagon R
- Celerio
- Alto
- Ignis (sold under the Nexa brand)
These lightweight models form a substantial portion of Maruti's product lineup, making the weight-based relaxation particularly advantageous for the company.
Current Regulatory Framework
Under existing GST regulations, vehicles are classified based on length and engine displacement. Sub-4-meter petrol vehicles with engines under 1,200cc and diesel variants under 1,500cc are taxed at 18 percent, while larger or more powerful vehicles attract a 40 percent tax rate.
Stringent CAFÉ 3 Norms Ahead
The upcoming CAFÉ 3 regulations, scheduled to take effect on April 1, 2027, represent a substantial tightening of emission standards. The revised CO₂ emission target has been set at 88.4 gm/km, significantly stricter than:
- The previously anticipated target of 91.7 gm/km
- The current CAFÉ 2 benchmark of 113 gm/km
Manufacturers failing to achieve their fleet-average emission targets under the new framework will face substantial financial penalties, raising the stakes considerably for all industry participants.
Industry at Crossroads
With the implementation date approaching and no consensus in sight, the automobile sector faces a critical decision point. The outcome will not only shape compliance strategies for individual manufacturers but could also influence vehicle design philosophies, pricing structures, and the pace of India's transition toward cleaner mobility.
As discussions continue within industry forums, stakeholders on both sides remain firm in their positions, suggesting that resolution may require intervention from regulatory authorities or compromise solutions that address concerns about both market fairness and environmental objectives.
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