Hyundai, Kia, Mahindra didn't meet emissions goals. But a govt report is still awaited.

India has delayed releasing a key emissions compliance report that shows eight automakers, including Hyundai Motor India, Kia India and Mahindra & Mahindra, failed to meet the country's Corporate Average Fuel Efficiency (CAFE-II) norms in FY23.

The delay stems from the government's indecision on the course of action to be taken post the release of data, given the stiff penalties outlined towards the end of the fiscal year, two people aware of the matter said. The Bureau of Energy Efficiency (BEE) had collected emissions data from manufacturers more than a year ago.

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CAFE norms are designed to improve a company's average fuel efficiency of vehicles produced. Selling more electric, hybrid, CNG and flex-fuel vehicles brings down average emissions, while more fossil fuel vehicles increase them.

Apart from the top three, the other five who missed the emissions norms are SkodaAuto Volkswagen India, Renault India, Honda Cars India, and Force Motors. Meanwhile, Maruti Suzuki and Tata Motors, two of the top players, remained within the legal limits.

Maruti Suzuki's actual emissions stood at 104.73 g/km, below the target of 107.28 g/km, while Tata Motors was below its 118.819 g/km target at 106.76 g/km. MG Motors too stayed within the target, with emissions of 128.99 g/km against the limit of 138.246 g/km.

No compliance problems

Mahindra said it does not see a CAFE compliance problem as per the 26 December 2022 notification. Automakers say industry has sought the government views on CAFE adherence under the older and the amended Energy Conservation Act separately. 

Mint did not receive a response from five other OEMs it wrote to until press time.

“We have been monitoring the situation on this topic. Our endeavour is to meet the CAFE norms and we are working towards it with the help of application of strong hybrid technology and battery electric vehicles in future," a Honda Cars spokesperson said in an email.

“The CAFE-I and CAFE-II standards were notified back in 2015. At the time, the regulations lacked provisions for carbon trading and were silent on the penalties, which have now become a major sticking point. While the new Energy Conservation Act amendment introduced carbon trading and carbon credits in December 2022, not much has been done to develop that mechanism further", one of the two persons cited above said.

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Automakers are calling for flexibility, proposing a five-year block for pooling carbon credits instead of annual penalties, allowing them to offset emissions over a longer period, the people said.

Under the amended Energy Conservation Act, which came into effect in January 2023, the fines for emissions violations surged from a maximum of ₹10 lakh to up to ₹50,000 per car sold. For automakers like Hyundai and Kia, this means potential penalties in the hundreds of crores for just the final quarter of FY23. However, automakers argue these penalties should not apply given the Act was implemented in the middle of FY23, and the penalties were introduced only in its last quarter.

The BEE and the Union renewable energy ministry also did not reply to Mint's queries on the delay in releasing the data and whether the government intends to invoke penalties, and whether these fines will be enforced or modified.

Foreign manufacturers behind on CAFE, await carbon trading mechanism

In May, Mint reported that Indian automakers were dead set against a BEE proposal to align India’s fuel efficiency standards with Europe's newer, stricter vehicle carbon emission norms. Automakers argued that the proposed CAFE-III norms, which set a CO2 emissions target of 70 gm/km by 2030, are "highly impractical." Despite increased investments in electric vehicles (EVs), they believe internal combustion engine (ICE) vehicles will continue to dominate the market over the next decade.

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Following discussions, BEE proposed an extension of the compliance period to a five-year block between 2032-2037 for meeting the target of 70 g/km, giving automakers more time to adapt and develop new technologies. However, the lack of clarity on whether penalties for FY23 will be enforced or waived has left the full implementation of the CAFE norms in limbo.

In Europe, automakers exceeding their CO2 emissions targets for vehicles can purchase carbon credits or allowances from other OEMs to offset their excess emissions.

Slowing EV sales add to concerns

Meanwhile, slowing EV sales are causing concern among automakers, who are already grappling with the challenge of transitioning to green mobility. In Europe, automakers face even stricter emission targets starting next year, as the EU's cap on average emissions from new vehicle sales will fall to 93.6 grams of CO2 per km (g/km), a 15% reduction from the 2021 baseline of 110.1 g/km.

This comes at a time when EV sales in Europe have also slowed, adding pressure on manufacturers to meet these stringent standards without relying solely on electric models to offset emissions. Non-compliance could lead to the industry having to cough up billions in fines.

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For India's smaller automakers like Renault Nissan, Skoda and Honda without a large green portfolio of vehicles, tough emission standards will pose a stiff challenge unless they invest significantly in EVs and cleaner fuels.

Meanwhile, automakers brace for stricter norms in the near future while they attempt to navigate the transition toward green mobility. Whether this transition will rely solely on electric vehicles or a combination of EVs, hybrids, and flex-fuel technology remains a crucial question for the industry which is awaiting direction to invest capital behind a specific technology.