Electric cars could become even more special for car companies from April 1, 2027. The reason is the new rules of CAFE-III. Under these rules, one electric car can count as 3 cars in a company’s fuel efficiency calculations.
But this does not mean that the company sold 3 cars by selling 1 EV. The company actually sold only 1 car. As per government rules only three cars will be counted for counting.
Why would the EV count be 3?
The full name of CAFE is Corporate Average Fuel Economy. If we understand in simple language, the government looks at the average of the vehicles of the car companies, how much fuel they use and how much CO2 they emit. If a company has more petrol and diesel cars, its average may be higher. In such a situation, an electric car can help improve the company’s average.
The new rules prescribe different calculations for different vehicles.
- Battery EVs and range-extended EVs: 3x
- Plug-in hybrid and flex-fuel ethanol hybrid: 2.5 times
- Normal strong hybrid: 1.6 times
- Flex-fuel ethanol cars: 1.1 times
That means EVs will get the biggest advantage
Understand with a simple example
Suppose a car company sold 90 normal cars and 10 EVs. In fact, the company has sold only 100 cars in total. But according to CAFE, 10 EV will count 3 times. So, while calculating, these 10 EVs can be considered equal to 30 cars. This can help the company keep a better track of its average fuel consumption and CO2. Keep in mind, the company’s sales figures will not change. The company has sold only 100 cars, not 120 or 130.
Every year the rules will become stricter
Rules for car companies in CAFE-III will gradually tighten from FY2028 to FY2032. The average limit will be 3.996 liters per 100 km in FY2028 for a company with a reference fleet weight of 1,229 kg. It will come down to 3.3273 liters per 100 km by FY 2032. This means that companies have to improve the fuel efficiency of their cars over time.
EVs aren’t the only way
The new rules do not require companies to sell only electric cars. Technologies like hybrid, plug-in hybrid, CNG and ethanol can also help.
Some petrol cars will get an 8% carbon-neutrality factor for fuel with E20 or more ethanol. For CNG cars it is 5%. Additional credits for certain technologies and the buying and selling of credits between companies are also in place.
EVs and hybrids are more likely to be seen in showrooms
The effect of these rules can also be seen on cars in the coming time. Companies that have good EV sales will be helped by CAFE regulations. At the same time, companies that are more dependent on petrol and diesel cars can focus more on EVs, hybrids and cars with low fuel consumption. Therefore, many companies may introduce new EV, hybrid and low consumption models in the next 12 to 18 months. That means CAFE-III isn’t just a government accounting rule, it could affect upcoming new cars as well.
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