The rise of SUVs in India has sparked concern at Maruti Suzuki, the country’s largest automaker, which warns that Corporate Average Fuel Efficiency (CAFE) norms are accelerating the decline of small cars, once considered the backbone of the Indian automobile market. According to a CNBC-TV18 report, 10 out of 17 models sold by Maruti Suzuki are small cars — a segment now under pressure due to regulatory shifts and changing consumer demand.

CAFE norms are aimed at improving fuel efficiency and reducing emissions. However, Maruti argues that the current framework unintentionally favors larger vehicles, such as SUVs, by allowing them more lenient emission targets, while imposing stricter penalties on smaller, fuel-efficient cars. In contrast, global markets often implement parallel guidelines to protect entry-level segments, recognizing the affordability constraints of low-income populations.

While Maruti highlights regulatory imbalance, other automakers suggest the shift is purely driven by consumer preference for larger, feature-rich vehicles. The debate has reached the corridors of power, with Union Minister Nitin Gadkari reportedly involved in high-level discussions. A possible resolution under consideration is to introduce lighter regulations for vehicles under 1,000 kg.

This regulatory crossroads could determine the fate of affordable mobility in India — a market where one-size-fits-all solutions rarely work.

India's small car segment — long considered the foundation of affordable mobility — is facing a slow decline, not just due to changing consumer tastes but also due to regulatory headwinds, according to Maruti Suzuki. The automaker claims that the CAFE norms (Corporate Average Fuel Efficiency) have unintentionally tilted the playing field in favor of larger, heavier vehicles like SUVs, which now dominate the market.

Under the current framework, emission and fuel efficiency targets are averaged across a carmaker’s entire fleet. While this was designed to push the industry toward cleaner vehicles, Maruti Suzuki argues it penalizes manufacturers with more small cars, which already achieve high fuel efficiency. The company points out that SUVs, despite being more polluting, are allowed relatively lenient standards — thereby encouraging automakers to shift their focus away from compact cars.

Globally, similar fuel efficiency regulations are accompanied by protective clauses for budget-friendly segments. India, with its low per capita income, lacks such safeguards, putting pressure on companies that cater to mass-market buyers. The issue has now drawn the attention of top government officials, including Minister Nitin Gadkari, who are reportedly evaluating policy adjustments for sub-1,000kg vehicles.

This policy debate could reshape the future of India’s auto industry — balancing sustainability with accessibility.