‘CAFE 3 norms kicking in around FY27-28 to be key disruptive trend’: Shailesh Chandra

Tata Motors, which currently has five EVs in its 12-model combined ICE and EV portfolio, estimates the upcoming CAFE 3 emission targets to be one of the key disruptive trends of the Indian automotive industry going forward. As per the company’s top executive, the more stringent Corporate Average Fuel Efficiency or CAFE 3 standards that are slated to come into force around April 2027, will be immensely challenging for OEMs.

According to Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles & Tata Passenger Electric Mobility, “While we have seen many technological breakthroughs in the past, the key disruptor going forward will be CAFE 3, which will hit the industry around 2027, and it will be more stringent than the ongoing CAFE 2 norms.”

While the ongoing CAFE 2 standards that came into force in April 2022, restrict vehicular emission at 113gm/km of CO2 for every new car, the CAFE 3 norms will be even tighter, demanding CO2 emissions to be capped at 91.7gm/km for the passenger vehicle segment. Chandra explained that whereas certain OEMs have been able to meet the CAFE 2 emission targets even without having any BEVs in their model mix, with CAFE 3 norms, “it will be almost impossible, thereby leading to consequences of hefty penalties.”

“Therefore, beyond 2027, we expect the trend of CNG and EV adoption to become faster. The industry will gravitate towards greener powertrains in the future, and we estimate the overall market to comprise 20% EVs, and 25% CNG vehicles by 2030,” Chandra pointed out.

He further said that the CAFE 3 norms will be the most stringent regulations the industry has ever witnessed since 2010, and while they will come with an additional cost to the consumer, they might not have an adverse impact on demand. “Even currently, when the average prices of cars are much higher than in the past, the demand is at a peak – registering 4.3 million in FY24. This is also because disposable incomes have increased. Therefore, in a market with only 32-cars-per-thousand penetration, there is huge scope.”

“We expect the Indian PV industry to touch 6 million units by FY30, registering a 6% CAGR up until FY30. Rising disposable incomes, and shorter ownership cycles, will be the key influencing factors of these projections,” Chandra highlighted.

While the existing Tata Motors portfolio caters to around 53 percent addressable market size, of which the company has a 26 percent market share by end-FY24, it aims to grow its addressable market to 80 percent by 2030. As a result, the company will launch two new models – Curvv (ICE) and Sierra (EV) - in FY25 itself – taking its addressable market to 65 percent by end-FY25, and is charting out a plan to grow it further to 80 percent.

“We are targeting a market share of 18%-25% by FY30, and we are looking at increasing our addressable market by increasing our name plates. We are in the process of finalising segments which will have high growth potential in the next five years. We are also driving the mainstreaming of EVs by expanding our portfolio with 10 new products by FY30,” Chandra signed off.