Hero MotoCorp has identified the proposed extension of Corporate Average Fuel Economy (CAFE) norms to two-wheelers as an emerging business risk, warning that a sudden rollout could increase compliance costs, disrupt product development, and hurt profitability in India's price-sensitive motorcycle market.
In its 2025-26 annual report, the country's largest two-wheeler maker said CAFE standards, which currently apply to passenger vehicles, are expected to expand to two-wheelers, requiring manufacturers to meet fleet-wide fuel efficiency targets.
While noting that the norms are important for improving fuel efficiency, lowering ownership costs, and reducing dependence on volatile global oil prices, the automaker cautioned that an abrupt implementation, including one driven by geopolitical developments, could leave manufacturers with little time to prepare.
According to Hero MotoCorp, such a scenario could force hurried product redesigns, raise compliance costs, and expose manufacturers to regulatory penalties. Passing on the additional costs to customers would be difficult in India's highly price-sensitive market, putting pressure on profitability and competitiveness.
The company also warned that failure to comply with the regulations could lead to financial penalties, product recalls, and reputational damage.
Hero noted that ICE motorcycles continue to account for the bulk of its sales, making it critical to achieve future fuel efficiency targets without disrupting its market position.
It added that complying with tighter standards would require not only changes to vehicles but also a broader transformation of the supply chain and stronger capabilities among component suppliers.
To prepare for the shift, Hero noted that it is upgrading its engines and increasing the use of lightweight materials to improve fuel efficiency. At the same time, it is expanding its electric vehicle portfolio to lower fleet-wide emissions and help meet future regulatory requirements.
The company said it is also engaging with policymakers through the Society of Indian Automobile Manufacturers (SIAM), advocating for targets that are realistic and technically feasible for the two-wheeler industry.
Beyond immediate compliance measures, Hero said it is investing in multiple low-emission powertrains rather than relying on a single technology. The company is developing electric vehicles alongside models capable of running on higher ethanol blends, reflecting its view that different technologies will continue to play a role in India's mobility transition.
Hero said R&D spending is increasingly focused on future regulations, including cleaner powertrains, connected vehicle technologies, and digital capabilities to support upcoming regulatory changes.
The company is also aligning its global product portfolio with stricter overseas standards. In the last financial year, it entered the UK and several European markets with a range of Euro 5+ compliant motorcycles, a move that it said supports its international expansion while meeting some of the world's most stringent emission regulations.
The annual report also lists Bharat Stage 7 emission norms for two-wheelers among the policy issues on which Hero is engaging with the government through SIAM, although it did not disclose any timeline or expected impact of those regulations.