Govt looks at tightening CAFE norms to push the production of EVs

In a bid to push automakers to increase production of electric vehicles by 2-3% every year, the government is mulling to tighten the corporate average fuel economy (CAFE) norms.

The move to tighten the CAFÉ norms comes after a failed attempt by the government to make vehicle manufacturers reduce the number of vehicles powered by internal combustion engines (conventional vehicles) met with stiff resistance from the industry.

The government had earlier planned to ban all three-wheelers with combustion engines by 2023 and two wheelers with engine capacity less than 150 cc by 2025. But the plan later got cancelled after lobbying from the automobile industry.

CAFE is the average fuel efficiency of all vehicles produced by a manufacturer in a given period, taking into consideration the sales volume of each model. The government expects that a strict CAFE target will provide incentives to auto makers to produce and sell more EVs, to improve their average fuel efficiency.

Rather than making production of EVs mandatory, auto makers will have to indirectly invest in EVs after the norms are tightened. Several automakers have already achieved their average fuel consumption target

Stringent CAFE norms have been one of the most effective ways to push electrification globally, with great successes seen in places such as California, which has among the highest density of electric vehicles globally.

“India seems to be taking lessons from the rest of the world. We are beginning to see that electrification happened the most where CAFE has been the most rigorous,” said Vinay Piparsania, Consulting Director at Counterpoint Research. “The only reason why automakers will make the urgent electric push is if there’s a penalty or a punitive cost, otherwise they would much prefer to maintain the status quo.”