Hero MotoCorp Flags CAFE Norm Risks for Two-Wheelers Ahead of New Fuel Efficiency Rules

Hero MotoCorp has highlighted the emerging business risks surrounding the proposed implementation of Corporate Average Fuel Economy (CAFE) norms for India's two-wheeler industry. In its latest annual report, the country's largest two-wheeler manufacturer said that while stricter fuel efficiency standards are an important step towards reducing fuel consumption and improving energy security, their implementation will require significant technological and financial investments from manufacturers.

CAFE norms are currently applicable to passenger vehicles, but the regulations are expected to expand to two-wheelers in the future. Once implemented, manufacturers will have to ensure that the average fuel efficiency of their entire product portfolio meets government-prescribed targets, rather than focusing on individual models.

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According to Hero MotoCorp, the move is particularly important in a market like India, where two-wheelers account for the largest share of personal mobility. Better fuel efficiency would help reduce running costs for consumers while also lowering the country's dependence on imported crude oil and reducing overall carbon emissions.

However, the company believes that the transition will not be possible without challenges. Hero MotoCorp has stated that if the regulations are introduced abruptly—potentially due to changing geopolitical conditions or energy security concerns—manufacturers may not get sufficient time to prepare. This could force companies to redesign existing products at a much faster pace, leading to higher engineering and manufacturing costs while also increasing the risk of missing compliance deadlines.

The company further stated that India's highly price-sensitive two-wheeler market makes it difficult for manufacturers to pass on these additional costs to customers. As a result, stricter regulations could put pressure on profitability and affect competitiveness, especially for brands with large internal combustion engine (ICE) portfolios.

Hero MotoCorp also pointed out that failing to comply with future CAFE regulations could expose manufacturers to financial penalties, product recalls and reputational damage. Since conventional petrol-powered motorcycles and scooters continue to contribute the majority of industry sales, improving their efficiency will remain crucial even as electric mobility gains momentum.

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To prepare for the transition, Hero MotoCorp said it is investing in more fuel-efficient engines and increasing the use of lightweight materials to improve overall vehicle efficiency. At the same time, the company is expanding its electric vehicle portfolio, which will help lower fleet-wide emissions and improve compliance with future fuel economy targets.

Beyond product development, Hero MotoCorp said achieving future CAFE requirements will also require a broader transformation across the automotive supply chain. Suppliers and component manufacturers will need to develop advanced technologies and manufacturing capabilities to support the next generation of more efficient two-wheelers.

The company also confirmed that it is working with policymakers through the Society of Indian Automobile Manufacturers (SIAM) to ensure that future CAFE norms for two-wheelers are technically achievable and practical for the industry. Hero believes that realistic implementation timelines and achievable targets will be critical in allowing manufacturers to meet regulatory requirements without significantly increasing costs for consumers.

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With the government’s push towards stricter emissions and fuel efficiency standards, Hero MotoCorp's statement underlines the requirement for a balance—delivering cleaner and more efficient motorcycles and scooters while ensuring they remain affordable for the buyers. With petrol-powered two-wheelers expected to continue dominating the market for the foreseeable future, manufacturers are required to simultaneously improve internal combustion technology and subsequently fast-track the adoption of electric mobility to meet evolving regulatory requirements.