Hero MotoCorp flags proposed two-wheeler CAFE norms as business risk

Hero MotoCorp has identified the proposed extension of Corporate Average Fuel Economy (CAFE) norms to two-wheelers as a potential business risk, stating that a sudden rollout could significantly increase development costs and impact profitability in India’s price-sensitive motorcycle market.

1. Hero says sudden implementation could increase compliance costs
2. Company is upgrading ICE engines and expanding EV portfolio
3. Bharat Stage 7 norms also listed among future regulatory priorities

Hero calls for realistic implementation of proposed CAFE norms

Hero MotoCorp has identified the proposed extension of Corporate Average Fuel Economy (CAFE) norms to two-wheelers as a potential business risk, stating that a sudden rollout could significantly increase development costs and impact profitability in India’s price-sensitive motorcycle market.

In its FY2025-26 annual report, Hero said CAFE regulations, which currently apply to passenger vehicles, are proposed to be extended to two-wheelers. Unlike emission norms that regulate tailpipe pollutants, CAFE standards require manufacturers to meet fleet-wide fuel efficiency targets across the vehicles they sell.

The company acknowledged that stricter fuel efficiency standards could help reduce fuel consumption, lower running costs for customers and reduce dependence on imported oil. However, it warned that a rapid implementation could leave manufacturers with limited time to redesign products, upgrade technologies and prepare their supplier base.

Hero added that passing higher compliance costs on to customers would be difficult in India’s highly price-sensitive two-wheeler market, putting additional pressure on profitability.

To prepare for future regulations, Hero said it is improving the efficiency of its internal combustion engines, increasing the use of lightweight materials and expanding its electric vehicle portfolio to help meet future fleet-wide fuel efficiency requirements.

The company also said it is investing in multiple low-emission technologies instead of relying solely on battery electric vehicles. Alongside EVs, Hero is developing motorcycles capable of running on higher ethanol blends, reflecting its view that multiple powertrain technologies will continue to play a role in India’s mobility transition.

Hero added that its R&D investments are increasingly focused on future regulatory requirements, including cleaner powertrains, connected vehicle technologies and digital capabilities.

BS7 norms also on Hero’s radar

The annual report also lists Bharat Stage 7 emission norms for two-wheelers among the policy issues on which Hero is engaging with the Society of Indian Automobile Manufacturers (SIAM). The company said it is advocating for implementation timelines and targets that are realistic and technically feasible for the industry, although it did not disclose when either the proposed CAFE norms or BS7 regulations could come into effect.