Mahindra & Mahindra has said it raised concerns over the proposed Corporate Average Fuel Efficiency (CAFE III) norms, warning that the draft framework could expose the company to annual penalties of up to ₹5,000 crore.
According to Financial Express, in a letter to P K Mishra, principal secretary to the Prime Minister, Group CEO and Managing Director Anish Shah said that the proposed emission targets appear “unrealistic”, given the current stage of electric vehicle (EV) adoption in India.
According to the company’s internal estimates, compliance would require a sharp ramp-up in EV volumes — nearly three times within two years and about 6.5 times over six years. Shah noted that such growth could be difficult due to limited charging infrastructure, price gaps between EVs and internal combustion engine vehicles, and the nascent state of the EV ecosystem.
He also highlighted global uncertainties, including supply chain disruptions and geopolitical tensions, as additional challenges. “The risk of huge penalties is therefore very real for us,” Shah said, adding that achieving the targets would require an “unrealistically large share of EVs” in the company’s portfolio.
Under the current CAFE-II regime, the automaker had faced a potential penalty of ₹1,788 crore, accounting for nearly 20 per cent of the total ₹8,771 crore imposed on the industry between FY23 and FY25. However, it incurred penalties only in FY23 and avoided further liabilities subsequently by expanding its EV portfolio and improving fuel efficiency.
Mahindra’s concerns
The company has also flagged what it termed a “policy imbalance” in the draft norms. It said manufacturers with limited investments in battery electric vehicles could meet targets through hybrid models, potentially skewing industry incentives.
“We humbly submit that CAFE III guidelines are a significant setback for EV. They will encourage the industry to manufacture hybrids, which will severely impact investments in the charging network and could potentially slow EV adoption,” the company said, pointing to its ₹12,000 crore investment in battery electric vehicle technology.
Mahindra has sought revisions in the treatment of EVs under the framework, arguing that tailpipe emissions for EVs should be classified as zero. It termed the draft approach — which assigns EVs a calculated emission value of 32.34 g/km — as “counter-intuitive”.
The company has also called for higher “super credits” for EVs to better reflect their environmental benefits and support early investments. Under the draft CAFE III norms, EVs currently carry a super credit of 3.0, meaning each EV sale is counted as three vehicles in fleet calculations.
According to the company, the current parameters make compliance more challenging for pure EV-focused strategies compared to hybrids, which continue to receive partial regulatory benefits.
