NEW DELHI — India's stricter CAFE III fuel efficiency norms took effect Friday, requiring passenger vehicle manufacturers to steadily reduce average fleet fuel consumption over a five-year period.

The Corporate Average Fuel Efficiency standards, overseen by the Bureau of Energy Efficiency under the Ministry of Power, tighten permissible carbon dioxide emissions per kilometre across each automaker's entire sales mix. Companies exceeding fleet-wide limits face financial penalties, pushing them toward hybrids and electric vehicles.

The third phase raises the bar considerably from the earlier CAFE II regime. The Bureau of Energy Efficiency set staggered targets rather than an immediate cliff, allowing manufacturers to adjust product lines gradually after industry bodies including the Society of Indian Automobile Manufacturers sought a phased approach.

Market leaders such as Maruti Suzuki, Tata Motors and Mahindra & Mahindra are expected to accelerate electric and strong-hybrid launches to stay compliant. Analysts at Nomura and ICRA say the standards will reshape India's small-car dominated market and reward manufacturers with broader electrified portfolios.

The norms form part of India's broader commitment to cut transport-sector emissions ahead of its 2070 net-zero target, with road transport among the fastest-growing sources of carbon emissions in the country.