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The debate for the introduction of the next round of emission norms has moved beyond technical discussions and is now centered on their impact on the market. Now the question which is being asked about the implementation of these norms is that central question now is whether the policy should be applied equally on all carmakers or focus on segmenting carmakers on the basis of their makes. It is said that entry-level small cars cater to a vastly different buyer base compared to larger, premium vehicles.

 

The draft introduced suggests that it should be equally applied to all manufacturers. Although this sounds quite realistic, it could have unintended consequences. It is to be remembered that entry-level buyers are highly price sensitive. If regulatory costs rise sharply, first-time car buyers may shift back to two-wheelers or the used-car market. This could reduce volumes at the lower end of the new-car market, potentially slowing the overall transition to cleaner mobility.

 

 

 

The draft present in for the proposed emission norms had included a concession for petrol cars weighing 909 kg or less. This was considered as support for the small-car segment. However, going through objections from rival manufacturers, the revised draft removed this clause and introduced tighter compliance requirements. The new compliance cycle will run from April 2027 for five years. Auto manufacturers ignoring the new norms or not following the norms will be penalised up to $550 per vehicle. The objective is to reduce average fleet emissions from 114 g/km to nearly 100 g/km by 2032. With additional credits and a stronger electric or hybrid mix, the effective emission level could fall further to 76 g/km.

 

Even within the notified CAFE structure for FY28 to FY32, the tightening is evident. The key constant in the formula moves from 3.7264 to 3.0139, reflecting roughly a 19 per cent tightening across the cycle. While this accelerates emission reduction targets on paper, it also increases engineering and technology costs — expenses that are more difficult to absorb in low-margin entry-level cars.

 

 

The small-car buyer remains the most price-sensitive segment in the market. This is also witnessed in recent sales data. Maruti’s mini and compact segments declined from 9,70,109 units in FY24 to 8,96,507 units in FY25, a decline of about 7.6 per cent. However, as a part of the new GST regime, the demand increased sharply. In December 2025, the sales of mini and compact vehicles rose to 92,929 units from 61,097 units during the same period, an increase of roughly 52 percent.

 

This shows that affordable vehicles attract more sales. It is speculated that introducing additional compliance costs at a sensitive stage could change the situation just as quickly. According to a recent transport report from NITI Aayog, India has around 33 cars per 1,000 people. This indicates that affordable small cars are the first preference for first-time buyers upgrading from two-wheelers. This segment is therefore critical to expanding car ownership while transitioning to cleaner fleets.

 

 

Granting a blanket exemption to all small cars would risk distorting competition and delaying clean-technology adoption. However, a narrowly defined, time-bound exception could serve as a transition bridge. A workable model could involve a limited carve-out for sub-4-metre entry cars, subject to strict emission floors, real-world compliance validation, and a defined sunset clause by FY32. Manufacturers receiving relief could commit to greater hybridisation, CNG penetration, or electrification within their portfolios and publish annual compliance data.

 

The environmental objective must remain intact. Transport accounts for about 12 per cent of total energy use, and passenger vehicles represent a significant share of transport-related emissions. Cleaner fleets are essential. However, policy success also depends on adoption volumes. If entry-level car demand weakens significantly, regulators may achieve numerical targets while slowing the broader transition. A calibrated exception for small cars is not anti-environment. It is a pragmatic way to ensure that India’s emission transition remains inclusive, affordable, and practically achievable.