Industry-wide ₹8,000-15,000 Cr cumulative penalty exposure FY28-FY32 modelled OEM by OEM, plus the capex required to close the gap and the PLI / PM E-DRIVE / GST incentive stack that offsets it.
Every obligated OEM faces some flavour of this question across the FY28-FY32 cycle: how big is the gap between my fleet-average position and the year-by-year Standard, and what does that gap cost me at the Section 26 EC Act schedule?
The size of the gap is a function of three things: where the OEM's fleet weighted average sits today, what BEV / SHEV / off-cycle / CNF levers the OEM can actually deploy by FY32, and what the credit market clears at when the OEM goes to buy or sell credits. The cost of the gap is then the Section 26 penalty rate applied to whatever shortfall remains after lever deployment and credit purchases.
Industry-wide directional
Climate Decode's model brackets the cumulative deficit-side penalty exposure for FY28-FY32 at ~₹8,000-15,000 Cr at gross statutory rates - with realised cost likely lower as OEMs partially close gaps via BEV ramp, SHEV deployment, off-cycle, and OTC purchases. Per-OEM specifics depend on the OEM's own fleet ledger, lever portfolio, and pooling decisions - not something we publish for any single maker.
Per-OEM cost view sliced for your fleet, your BEV ramp, your scenarios
TerraNova for CAFE runs the position-computation and forecasting model against your own fleet ledger, your own lever portfolio, your own pool, and your own policy-stability assumptions - producing the ₹ Cr exposure number that's actually yours.
Book a walkthrough →For OEMs whose BEV and SHEV ramp delivery puts them above the year-by-year Standard, the question flips: how much of the nominal g-unit surplus actually converts to realised cash flow?
The answer depends on the OTC credit market's clearing dynamics. If supply structurally outstrips demand (the base case), credits clear at the BEE floor and most of an OEM's nominal surplus ends up banked rather than sold - the "scrip nobody wants" problem. If supply tightens (under an EU-style super-credit phase-out, or if BEV ramps across the surplus-side OEMs underperform guidance), credits clear closer to the ceiling and a higher share is realised.
The structural question
How much of nominal surplus converts to realised cash flow depends on the credit market's clearing - not on the OEM's own decisions. This is precisely the asymmetric exposure that surplus-side treasury teams hedge against by tracking the Section 4 super-credit policy stability.
The aggregate 5-year value of the OTC credit market varies materially across realistic scenarios. The four levers that move it: super-credit policy stability (does 3.0× BEV hold through FY32 or phase out EU-style?), BEV ramp delivery (does public OEM guidance convert to actual sales?), pooling adoption (how many premium-importer pools form under Section 7?), and enforcement intensity (does the March 2026 ~35% recalculation pattern continue?).
The single most consequential variable
For a treasury team deciding whether to bank credits or sell them at the floor, super-credit policy stability is the variable to track. A move from 3.0× flat to an EU-style phase-out moves the 5-year market value by roughly 2.5× on our model; across all four scenarios the spread is roughly an order of magnitude. TerraNova for CAFE runs the per-OEM clearing position under all four scenarios with your own assumptions.
Closing the CAFE-III gap is not free. The capex needed across product platforms, BEV launches, battery sourcing, manufacturing line retooling, and dealer infrastructure is meaningful for every major OEM.
| OEM | Directional capex scale FY26-FY30 (CD view) | Key drivers |
|---|---|---|
| Tata Motors | Heavy - multi-platform BEV pipeline | Sierra EV, Avinya 1, Curvv EV ramp, Harrier EV, Tata Power TPEZ charging network |
| Maruti Suzuki | Heaviest absolute commit | eVitara, eWagonR, eSwift, SHEV powertrain investments across volume models |
| Mahindra | Heavy - dedicated BEV platform | INGLO BEV platform (BE 6, XEV 9e, Sierra EV) |
| Hyundai Motor India | Moderate–heavy | Creta EV, Carens EV, Inster localisation, charging partnerships |
| Toyota Kirloskar | Moderate - SHEV-led | SHEV powertrain expansion, bZ4X local assembly evaluation |
| Honda Cars India | Light - powertrain refresh-led | e:HEV powertrain refresh; BEV from FY29 contingent on import economics |
₹-level per-OEM capex brackets are Climate Decode model estimates, reserved for platform users - this table shows directional scale only.
The real cost question
CAFE-III capex is mostly capex the OEMs would do anyway under their existing strategy plans - what CAFE-III does is harden the timeline and shift the spend forward. The marginal CAFE-driven capex is closer to 20-40% of the headline numbers above.
BEV economics in India are propped up by a deep stack of incentives that offset the capex and per-unit cost gap to ICE. The stack is what makes the per-unit value of a BEV actually defensible at sub-₹20L price points.
For any BEV in the lineup, the actual per-unit economics are a stack of incentives layered on top of the pre-tax base price. The components are the same across OEMs - the magnitudes vary by model, state of registration, fuel-mix year, and the prevailing OTC clearing price.
The strategic implication for treasury
The CAFE super-credit component is the most policy-exposed item in the stack. If BEE haircuts the 3.0× multiplier mid-cycle, the per-unit value drops materially - and so does the entire BEV-economics calculus the OEM is pricing in today when committing capex to FY28+ launches. The April 2026 circulated draft already does this to the hybrid legs - SHEV 2.0→1.6×, flex-fuel 1.5→1.1×, BEV intact (Business Standard) - making this the variable to stress-test before signing off on platform investments.
TerraNova for Treasury Teams
TerraNova for CAFE produces the per-unit value stack for every model in your lineup with each component as a switchable lever - so a CFO can see what changes when GST, PLI, or super-credit policy moves.
Book a treasury walkthrough →Part 6 walks through the supply-demand model, the clearing price logic, and the four-scenario outputs in full - with the formulas every OEM treasury team needs to reproduce internally.
Part 3 - OEM Landscape · Part 4 - Open Issues · Part 7 - TerraNova for CAFE
Primary regulatory sources and verified analysis cited above.
From per-OEM cost exposure to the 5-year credit-market view, Climate Decode helps Indian passenger-vehicle OEMs sequence the CAFE-III response with finance-grade clarity.
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