India may ease small car fuel norms amid SUV boom, Maruti could benefit: Report

In a potential policy pivot, the Indian government is considering easing fuel efficiency norms for small cars to counter declining sales in the budget segment. The move follows lobbying efforts by Maruti Suzuki, India’s largest carmaker, which has seen its entry-level car sales shrink in the face of a booming SUV market, a report by Reuters stated, citing multiple industry and government sources.

Small cars losing ground

Maruti Suzuki has had a commanding position in the small car segment for decades, with vehicles such as the Alto and WagonR leading the charge. However, consumer preferences and trends have all changed rapidly. Before COVID-19, small cars accounted for nearly two-thirds of Maruti Suzuki's sales, but this has now dropped to below 50 per cent out of the 1.7 million cars it sold in FY2024–25. The fall-off in this segment is emblematic of the wider automotive shift in India, with compact and mid-size SUVs representing the bulk of new car purchases.

The government, too, is reportedly concerned about this trend. A senior official told Reuters that sliding demand in the affordable segment could hurt the overall growth of the passenger vehicle industry and limit mobility access for India’s lower-income consumers.

Proposed norms target sub 1,000 kg cars

Under India’s current Corporate Average Fuel Efficiency (CAFE) regulations, permissible CO₂ emissions are tied to a car’s weight. To comply, automakers must maintain fleet-wide efficiency, often by pushing electric or low-emission models. The proposed revision would ease emission targets specifically for cars weighing under 1,000 kg—offering regulatory relief to companies with a sizable share of small vehicles.

Maruti Suzuki, with 10 of its 17 models under this threshold, would be the biggest beneficiary. Hyundai, Renault, Toyota, and JSW MG Motor also sell lightweight models and may gain from the relaxation, though none have formally responded to requests for comment, according to Reuters.

Industry pushback

The Ministry of Heavy Industries held a closed-door meeting on June 17 with automakers including Tata Motors, Mahindra & Mahindra, and Volkswagen to discuss the possibility of granting small cars more leeway under the upcoming fuel efficiency norms, which are due to take effect in April 2027.

However, some automakers are reportedly uneasy. Four sources told Reuters that such a move could disrupt the previously agreed industry consensus on emission standards and potentially grant Maruti an unfair advantage in the market.

Venkatram Mamillapalle, country head of Renault India, told Reuters that the company trusts India’s auto industry body to "represent the collective voice of the industry that benefits all stakeholders."

Environmental trade offs

The sustainability report for 2024, by Suzuki Motor Corporation, Maruti's Japanese parent company, said small cars are environmentally sound—not just because they are driven less and, therefore, happier, but it also consumes less material and energy during production.

While the environmental merits of small cars are not in dispute, applying differentiated norms based on size or weight was not part of earlier consultations, four industry sources told Reuters. If implemented, this shift could reshape the policy landscape and affect how future fuel efficiency standards are negotiated.

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