The Indian government has officially notified the CAFE 2027 (Corporate Average Fuel Economy) norms, largely consistent with the draft released in July 2026. These regulations aim to enhance fuel efficiency across the automotive sector, driving a significant shift towards electric vehicles (EVs) in the country.
Automakers Face Tightening Standards
According to foreign brokerage Nomura, most Original Equipment Manufacturers (OEMs) are expected to meet the FY28 CAFE requirements with relatively moderate EV penetration. However, the targets are projected to tighten further, necessitating an annual increase of 1-2 percentage points in the required EV mix over the next five years.
Nomura's analysis estimates EV penetration rates for various manufacturers: Maruti Suzuki India Ltd (MSIL) at 1-3%, Hyundai Motor India Ltd at 4-7%, Tata Motors Passenger Vehicle Ltd (TMPV) at 4-7%, and Mahindra & Mahindra (M&M) at 13-15%.
TMPV and M&M Emerge as Key Beneficiaries
Companies with a higher EV presence in their portfolios are expected to gain market share. Nomura specifically highlights Tata Motors Passenger Vehicles (TMPV) and Mahindra & Mahindra (M&M) as key beneficiaries, particularly if EV penetration accelerates faster than anticipated. Hyundai India also holds potential for future gains, supported by its upcoming mass-market EV and its parent company's robust EV capabilities.
Impact on Other Players and Suppliers
- Maruti Suzuki India Ltd (MSIL): While the final CAFE framework should be manageable for MSIL, the removal of the small-car concession and reduced strong-hybrid credit will diminish some benefits. MSIL is actively developing a range-extender hybrid for compact cars and investing in next-generation EV and HEV technologies.
- Suppliers: Nomura identifies several suppliers poised for growth. Sona Comstar is expected to benefit significantly due to its exposure to electric powertrain components. Uno Minda, Motherson Sumi, and Samvardhana Motherson are also projected to gain from increased content opportunities within the evolving automotive landscape.
Projected EV Penetration Growth
Nomura forecasts a substantial rise in EV penetration across different segments:
- Passenger Vehicles (PV): Expected to grow from an estimated 7.1% in FY27 to 12.7% by FY30.
- Two-Wheelers (2W): Projected to increase from 10.1% in FY27 to 22% by FY30.
- Scooters (within 2W): Anticipated to jump from 21% in August 2026 to 45% by FY30.
These projections underscore the transformative impact of the CAFE III fuel efficiency norms on India's automotive industry, pushing manufacturers towards a greener, more electrified future.