India Scraps Fuel Efficiency Incentives for Small Cars, New Rules Take Effect in 2027

The Indian government has revised its upcoming fuel efficiency regulations, set to take effect in April 2027, eliminating a previously proposed emissions leniency for small gasoline-powered vehicles with a curb weight of 909 kg or less. This provision had drawn criticism for favoring Maruti Suzuki, which holds a 95% share of the small-car market, prompting opposition from automakers such as Tata Motors and Mahindra & Mahindra. The updated rules tighten compliance concessions for heavier vehicles, requiring all automakers to improve fuel efficiency. They also introduce a credit system that rewards sales of electric and plug-in hybrid vehicles and allows manufacturers to average their fleet’s fuel consumption performance collectively. Companies failing to meet the standards will face fines of up to $550 per non-compliant vehicle. The policy aims to reduce the industry-wide average fleet emissions from 114 grams of CO₂ per kilometer to 100 grams by 2032. If electric vehicles reach an 11% market share, emissions could drop further to 76 grams per kilometer. The transport sector accounts for 12% of India’s total energy consumption, with passenger vehicles contributing nearly 90% of its emissions.