Hyundai Confident on CAFE 3 Compliance, Plans Local Dedicated EV in FY27

Hyundai Motor India Ltd is confident of meeting the upcoming Corporate Average Fuel Efficiency, or CAFE 3, norms, backed by its powertrain strategy and upcoming product interventions, Managing Director and Chief Executive Officer Tarun Garg said.

The company has already complied with the norms applicable for FY26 and has assessed the requirements under the latest CAFE 3 draft, he said during a media call after Hyundai Motor India’s Q4 and FY26 results.

“On the regulatory front, we have fully met CAFE requirements for FY26. For CAFE3, based on the recent draft, we have calculated the requirements and remain fully confident of meeting the compliance backed by our strong powertrain strategy,” Garg said.

Hyundai’s confidence comes from a portfolio that spans multiple body styles and powertrains. Its India line-up includes hatchbacks such as Grand i10 Nios and i20, sedans such as Aura and Verna, and SUVs such as Exter, Venue, Creta and Alcazar. The company also sells electric models such as Creta Electric and Ioniq 5, while its mass-market portfolio includes petrol, diesel and CNG options.

This spread is important because CAFE compliance is calculated at a fleet level. Companies with wider powertrain options and lower-emission models have more flexibility in managing their corporate average emissions.

Hyundai has also been seeing stronger contribution from alternative fuel options. In Q4 FY26, the company reported its highest-ever quarterly CNG contribution of 18%, driven by rising adoption and entry into the commercial mobility segment.

FY27 Growth Plan

For FY27, Hyundai Motor India is targeting 8-10% domestic volume growth, driven by product actions and network expansion. It is also aiming for 8-10% export volume growth, supported by market diversification and product-led opportunities. The company has lined up two completely new nameplates in FY27, both in the SUV category. One will strengthen its position in the mid-SUV segment, while the other will mark the debut of its localised dedicated EV in the compact SUV space.

Garg said Hyundai has started FY27 on a strong note, with April domestic volumes growing 17% year-on-year. He said the company expects the momentum to continue, backed by new launches in high-demand segments.

On EVs, Garg said industry penetration has moved up from around 2.2–2.4% earlier to 4.4% in calendar 2025 and 4.8% in calendar 2026, indicating that the category is gaining momentum.

“And we do not have a fully dedicated mass-volume, dedicated model. I believe that the strong, dedicated EV will bring a very strong EV portfolio addition to us,” he said.

For Hyundai, EV penetration is currently lower than the industry average. Garg said the company sells around 700-800 electric vehicles a month out of average monthly volumes of about 50,000 units, putting Hyundai’s EV penetration at around 1.5-2%. “Industry, 4.8%. Hyundai, 2.0%,” he said.

Hyundai has also said it intends to regain the number two position in India’s passenger vehicle market, though Garg did not put a timeline to it.

“We already shared with you the volume plan and we have every intention to come back to the number two position. Now, which year and all depends on so many other things. Not only on us, but on the competition, etc. So, I think we will not make any claim as such. But yes, we are very passionate about our position and we will get it back sooner or later,” he said.

CAFE 3 Draft Eases Curve, Deadline Remains

The latest CAFE 3 draft has proposed softer emission limits compared with the September draft. The latest draft keeps the same formula for calculating fuel-efficiency targets but changes the constants, making the curve flatter and allowing higher permissible emissions for the same vehicle weight. Smaller cars benefit more from the flatter curve, although the earlier explicit 3g CO₂/km relief for small cars has been dropped.

The CAFE norms apply to M1 category passenger vehicles, which include cars that seat up to nine people and weigh up to 3,500 kg. The proposed standards are scheduled to come into force from April 1, 2027. 

The government has also indicated that there will be no extension to the deadline. Hanif Qureshi, additional secretary at the Ministry of Heavy Industries, said the question of an extension was unlikely to arise as the ministry had been consulting manufacturers through the drafting process and had taken their feedback on board. The CAFE 3 window runs from April 1, 2027, to March 31, 2032. 

Mahindra Also Confident

Hyundai is not alone in expressing confidence on compliance. Mahindra & Mahindra expects to meet the upcoming fuel efficiency norms by increasing the share of EVs in its SUV portfolio. The company is targeting EV penetration of 13-17% in its passenger vehicle portfolio by March 2027 and expects to reach 18-20% over a five-year period. 

Rajesh Jejurikar, Executive Director and CEO, Auto and Farm Sector, Mahindra & Mahindra, said the company’s EV mix had already moved from around 9.5% to over 11% in recent months, supported by traction in its electric SUV portfolio. “We were already at around 9.5%… the last two months have been 11% plus. So we should comfortably be able to meet the requirements,” Jejurikar said. 

Mahindra’s position is helped by the fact that its passenger vehicle portfolio is entirely SUV-led and its EV compliance strategy is centred around electric SUVs.

Maruti Sees Multi-Fuel Path

Maruti Suzuki, too, expects the new CAFE rules to be manageable, though its approach is different. Chairman R C Bhargava said the norms are unlikely to be very difficult for the company, especially if it has multiple fuel options.

“The new CAFE rules are not going to get that difficult for us to do, especially if we have multiple fuel options and we can get into CBG and ethanol and such fuels. I think it's not going to make too much of a difference,” Bhargava said.

Maruti’s position reflects its broader multi-powertrain approach, where small cars, CNG, hybrids, ethanol and compressed biogas are expected to play a role in lowering fleet emissions, even as the company gradually builds its EV portfolio.