India’s love for small cars is under pressure. Demand for hatchbacks has fallen sharply in the last two years, forcing the industry to rethink. Now reports suggest the government might soften fuel efficiency norms after automakers, especially Maruti Suzuki, raised concerns. If this change goes ahead, it could revive interest in compact cars.

Maruti’s Small Car Sales Are Slipping

Maruti Suzuki remains one of India’s top-selling brands, with bestsellers like Alto and WagonR ruling city roads for years. Earlier, these smaller models contributed nearly two-thirds of Maruti’s total sales, but that share has now fallen below fifty percent. In the 2023-24 financial year, Maruti sold around 1.7 million vehicles, yet the share of its small cars kept shrinking.

Why Fuel Norms Could Change

Some days ago, news emerged that India was set to make tighter fuel efficiency norms for small cars. But after new industry inputs, the government could dilute these norms. The strongest push was from Maruti Suzuki, which claimed that stringent norms would further cut small car sales. As SUVs have become humongously popular, small cars have been losing their sheen, and that’s why a rule revision could be in the offing.

Corporate Average Fuel Efficiency Defined

According to India’s existing Corporate Average Fuel Efficiency (CAFE) regulations, vehicles weighing less than 3,500 kilograms need to remain within carbon dioxide emission limits corresponding to their weight. There is presently a move to relax these targets for vehicles under 1,000 kilograms. This would provide models such as Alto and WagonR the much-needed leeway to survive in the market without sky-rocketing prices in order to achieve tougher targets.

Other Companies Can Gain Too

Maruti has around ten models with a weight of less than 1,000 kilograms from the overall seventeen, so it stands to gain the most with relaxed regulations. Still, other manufacturers such as Hyundai, JSW MG Motor, Renault, and Toyota also have a few lighter cars, but their quantity is less. These companies might gain too if standards are lowered, but Maruti would gain the most.

What Happens Next?

Previous rounds of discussion between the government and automakers never suggested distinct rules by size or weight. If officials relax the targets now, it would be a new turn that might be interpreted as pro-Maruti. In the months ahead, how the government and auto firms hammer out a consensus will be worth watching because it will redefine India’s small car market in a large way.