The latest CAFE III draft has pushed the CO2 target for the Maruti Suzuki Alto to 63.7g/km, up from the 54.1g/km that would have applied had the September 2025 draft stayed. That 9.6‑gram jump means the government is treating lighter cars with a softer burn‑rate requirement.
The change comes from flattening the slope of the target curve: the slope dropped from 0.002 to 0.00158 and the reference weight rose from 1,170kg to 1,229kg. The net effect is that a hatchback that once faced a 54.1g/km ceiling now has a 63.7g/km ceiling, while an SUV above 1,400kg must tighten its fuel‑efficiency more aggressively.
For makers, the formula now rewards portfolios that lean toward compact cars. A manufacturer that sells 70% hatchbacks will see a lower overall compliance weight than one that pushes 60% SUVs. However, the benefit is still limited – the entire fleet’s fuel economy and power‑train mix still drive the final CO2 figure.
On the buyer side, the policy change follows a steep GST cut in September last year that slashed the tax on small cars from 28% to 18%. Maruti Suzuki’s own sales data show a 58% rise in Alto and other under‑4‑metre models, while entry‑level volumes jumped 96%. Yet the market share of hatchbacks is still a fraction of the SUV‑cross‑over dominance, hovering around 21% of total sales.
Competitors such as the Hyundai i20, Tata Tiago, and Mahindra e2o are stuck in the same regulatory lane. Their prices range from ₹4.90 lakh to ₹6.30 lakh, with boot spaces between 300 L and 330 L. The new CAFE curve will push them to tweak battery‑driven or mild‑hybrid tech if they want to stay ahead.
The policy is slated to take effect from FY28, giving automakers a window to recalibrate engines, add lightweight materials, or explore electric variants. Buyers should watch how the 63.7g/km target translates into real‑world fuel costs, especially as the government eyes stricter CO2 limits for the next fiscal cycle.
In short, the flatter CAFE curve offers a modest breathing room for small‑car makers, but the larger SUV trend remains a decisive factor for Indian consumers. The next few years will show whether the market's appetite for compact cars can match the regulatory easing.