India’s plan to tighten fuel-efficiency rules under the proposed third phase of the Corporate Average Fuel Efficiency (CAFE) rules from FY28 has opened a sharp divide within the auto industry, with carmakers split over how the next phase of norms should treat small and large vehicles. The framework sticks to a weight-based formula that steadily tightens through FY32, but its structure means lighter cars face far steeper improvements than heavier SUVs.

Companies with a predominantly small-car portfolio have argued that this puts an unequal burden on budget models, which already operate on wafer-thin margins and have limited room for costly technologies like hybrids. They warn that pushing stringent targets onto entry-level cars risks making them unaffordable for first-time buyers and cou

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