Passenger Vehicle Makers Miss Fuel Efficiency Targets

Analysis of India Missing Passenger Vehicle Emission Targets for 2022-23 and Impact on Auto Companies and Component Manufacturers

Source and Citation: Original reporting from Economic Times published Jan 08, 2024 on emission target miss.

Analysis for Layman

Corporate Average Fuel Economy (CAFE)

CAFE stands for Corporate Average Fuel Economy standards, set by the government to reduce carbon emissions from vehicles and improve fuel efficiency.

Emission Target Miss for 2022-23

In the 2022-23 fiscal year, passenger vehicles, including cars, vans, and utility vehicles, failed to meet the CAFE emission target of 113 gm/km set by the transport ministry. The actual emissions reached 116.78 gm/km, indicating that, on average, new vehicles sold were less fuel-efficient than required. This miss is the first since the adoption of standards in 2017 and has negative implications for India’s climate change commitments to reduce emissions by 45% by 2030 compared to 2005 levels.

Passenger Vehicle Makers Miss Fuel Efficiency Targets

Impact on Retail Investors

Technology Investments and Product Positioning

The CAFE miss suggests a lower level of preparedness among auto companies in terms of technology investments and product positioning for sustainable mobility transition. Companies lagging in efficiency and electrification goals may face stricter compliance norms, leading to increased costs related to investments, penalties, and working capital needs. Less proactive players, such as Maruti, Tata Motors, M&M, and Ashok Leyland, with high exposure to traditional ICE platforms, may experience worsening profitability and sales growth. Investors should evaluate each company’s emission roadmap execution, as those embracing EVs and modern tech early will likely gain market share.

Impact on Industries

Policy Focus on Transport Decarbonisation

The emission norms miss will bring a sharper policy focus on transport decarbonisation. Vehicle makers and component suppliers will need to accelerate investments in greener technologies, even if short-term profitability is impacted. Companies expanding EV offerings through new platforms and global partnerships, such as Bajaj Auto and TVS Motor, will be better positioned as trends favor sustainability. EV component manufacturers like Exide, Amara Raja, and Sandhar Technologies stand to benefit, while traditional ICE vehicle and parts makers may face higher disruptions. Government support for boosting EV demand through incentives can cushion volume shocks for incumbents. Overall, expect segment shifts and supply chain realignment as emission and safety regulations become more stringent, with India pursuing net-zero goals.

Long Term Benefits & Negatives

Long Term Positives

  • Mainstream EV adoption reducing India’s import burden and emissions.
  • Auto companies investing more in R&D to build sustainable portfolios.
  • Make in India boost via domestic manufacturing of components.
  • Improved air quality and lower health hazards in urban centers over time.

Long Term Risks

  • Short-term profitability pressures on automakers to comply with regulations.
  • Viability concerns for smaller manufacturers and dealers without scale.
  • Significant retraining needs across the workforce to handle new technologies.
  • EV value chain evolution still in early stages.

Short Term Benefits & Negatives


  • Product positioning enhancement among makers expanding EV range proactively.
  • Gradual technology transition allowing planning time for the ecosystem.


  • Stricter compliance norms on laggard companies with higher penalties.
  • Component makers may pause capacity expansion for conventional powertrains.
  • Inventory write-down needs as unsold BS-IV vehicles face usage restrictions.
  • Dealers facing viability pressures amid demand swings away from ICE options.

Potential Impact of Missed Fuel Efficiency Targets on Companies

While publicly traded companies are not directly named in the article, various industry players and sectors could be affected by the missed fuel efficiency targets:

Indian Companies Potentially at Risk:

  • Traditional Automakers: (Maruti Suzuki, Tata Motors, Mahindra & Mahindra) – These companies are heavily reliant on internal combustion engine (ICE) vehicles and might face penalties for non-compliance with CAFE standards. Increased focus on electric vehicles (EVs) could threaten their market share in the long run.
  • Component Suppliers for ICE Vehicles: (Bosch India, Bharat Forge, Minda Industries) – The shift towards EVs could negatively impact demand for components specific to ICE vehicles, affecting their revenue and profitability.
  • Oil & Gas Companies: (Indian Oil Corporation, Reliance Industries) – Increased adoption of EVs could lead to lower fuel consumption, impacting the demand for gasoline and diesel in the long run.

Indian Companies Potentially to Gain:

  • Electric Vehicle Manufacturers: (Tata Motors, Mahindra Electric Mobility, Ather Energy) – Increased pressure on ICE vehicles could benefit EV companies by boosting market demand for their products.
  • Lithium-ion Battery Manufacturers & Suppliers: (Exide Industries, Tata Chemicals, Bharat Electronics) – Increased EV adoption would require more batteries, benefiting companies involved in their production and supply.
  • Renewable Energy Companies: (Adani Green Energy, Tata Power Renewable Energy, Greenko) – Transition towards EVs relies heavily on renewable energy for charging, potentially benefitting green energy companies.

Global Companies Potentially to Gain:

  • Global EV Manufacturers: (Tesla, Volkswagen, Toyota) – Increased interest in EVs in India could open up new market opportunities for global players.
  • Global Battery Manufacturers & Suppliers: (Panasonic, LG Chem, CATL) – Increased demand for EV batteries in India could benefit global battery manufacturers and suppliers.
  • Technology Companies Providing EV Charging Solutions: (ABB, Siemens, ChargePoint) – Growing EV adoption in India would create demand for efficient charging infrastructure, benefiting technology companies in this space.

Global Companies Potentially at Risk:

  • Global Oil & Gas Companies: (ExxonMobil, Shell, BP) – Similar to Indian oil companies, global giants could face reduced demand for fossil fuels in the long run due to the shift towards EVs.

Market Sentiment:

The news of missed fuel efficiency targets could create mixed market sentiment. While traditional automakers and related sectors might face short-term headwinds, companies and technologies related to EVs and clean energy could see increased interest and potentially positive valuations. Ultimately, the market’s reaction will depend on the government’s response to the missed target and its future policy direction for the auto industry.

Please note: This analysis is based on the available information and does not involve individual company names. Investors should conduct thorough due diligence before making any investment decisions related to this news.

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