Daybreak - Maruti, Tata are caught between war, EV delays, and emission rules. They found an unlikely fix

Episode Date: May 10, 2026

India's carmakers are staring down a deadline. In less than a year, new emission norms will require them to dramatically cut their carbon output — or pay hundreds of millions of dollars in fines. Electric vehicles were supposed to be the answer. But the batteries aren't ready, the infrastructure isn't there, and adoption has been slower than anyone predicted.So the industry has quietly pivoted to an unlikely stopgap: CNG. Tata, Maruti, and Hyundai are all betting on it. In fact, two in every five Maruti cars sold last year ran on the fuel. But a stopgap is still just a stopgap.Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

A little more than a month ago, 22 Indian vessels were stuck near the Strait of Hormuz. Six of them carried liquefied petroleum gas. Four were crude oil tankers and one had natural gas. When you take all of them together, it's actually a very accurate picture of India's import priorities, especially as the world as a whole is grappling with a sweeping fuel shortage. For example, South Korea and Japan are increasing their reliance on go. Thailand and Vietnam are pushing for remote work and Pakistan has hiked up its petrol prices by over 40%. Meanwhile, India has turned to Russia for crude oil and it has ring-fenced CNG or compressed natural gas supplies for priority sectors like household and transport.

What also happened was that this came as a kind of critical support for Indian car makers. You see, in less than a year, stricter cafe 3 or corporate aviators, average fuel efficiency emission norms are expected to force automobile manufacturers to cut their carbon dioxide output by a lot. The current average target for CO2 emissions right now is a little more than 100 grams per kilometer. And that's a number that's actually pretty hard to meet in a market that is actually still very reliant on petrol and diesel. Plus, if the companies do miss the target, then the penalty could cost hundreds of millions of dollars. So, it's quite a tangle for automobile makers.

Now, one of the fixes for this problem was supposed to be electric vehicles. But unfortunately, EV adoption in India has been slower than what was expected. So, this is where CNG came in and ended up becoming an unlikely saviour for both the government and the carmakers. The thing is, India has spent nearly $140 billion importing crude oil in just FY25. Natural gas imports, on the other hand, have cost only about $15 to $20 billion. Which means if the war continues, even a marginal spike in the price of crude oil would add over $60 billion to what is already a very high import bill. A spike in LNG, though, would add only a fraction of that.

Plus, the additional benefit is this, that for carmakers, a CNG vehicle emits nearly 20% less CO2 than a petrol one, and that directly helps them with complying to the Cafe 3 emission norms. Also, this benefit is being aided by another shift. You see, for years, buyers have ignored CNG cars in favour of space and power. But now, that is slowly starting to change. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Richard Virgis, and every day of the week,

my co-host, Nikita Sharma and I will bring you one news story that is worth understanding and worth your time. Today is Monday, the 11th of May. Anish Shah, the CEO of Mahindra Group, wrote to the government this march. He called the new emission targets unrealistic, especially given how slowly EVs have taken off in this country. The original Café 3 draft, which was released in June 24, proposed a hard gap to emissions that were closer to 90 grams per kilometer. These norms were set to be implemented by April 2027. Now, let me quickly explain how Cafe norms actually work. First, the government looks at everything a company sells in a year, like the small hatchbacks,

the mid-sized sedans, the petrol SUVs, and then it calculates a single average CO2 figure across this lineup of models. This calculated average is then what has to stay below a government set limit, which, like I said, for Cafe 3 is 90 grams per kilometer. My colleague, the Ken reporter Suprata Nopam, also learned that Siam, the industry body, is still actively in negotiations with the government. You see, since Cafe One was introduced in 2017, the system has been tightening in phases. Café 1 set a relatively gentle starting target of 130 grams. Café 2, which followed 5 years later, made it stricter. And it did push real change.

For example, Maruti dropped diesel entirely in 2020 and Honda did the same about three years later. But Cafe 3 is at a whole other level. You see, most companies. car makers sell petrol SUVs averaging around 115 grams per kilometer. Data from Jyto Dynamics and Auto Insights platform shows Maruti, Hyundai, Mahindra and Toyota all fall short of the proposed limits with their current mix of models. Which means they are more likely to be in a position where they'll have to pay very hefty fines for not meeting the norms. And that's forcing most original equipment manufacturers or OEMs to rethink their portfolios.

Part of this is because the EVs are not ready to bridge that gap. Siprit spoke to an auto consultant who has worked with Suzuki and MG Motors. He said that Indian companies like Reliance, GSW, Exide and others have announced over 1 lakh-crow rupees worth of investments in lithium-ion, but the technology just hasn't matured yet. Globally, Chinese battery maker, CATL, has unveiled sodium iron cells for passenger cars and solid-state batteries are beginning to appear in commercial vehicles. India is watching, but it hasn't caught up.

The consultant told Sir Prith that until India cracks the battery technology and charging infrastructure, EB adoption should not be forced here. In the meantime, CNG prices have risen more than two times in a decade and are now at nearly 90 rupees per kilogram. It's a little cheaper than petrol, but a factory-fitted CNG car costs about 60,000 rupees to 1-lack more petrol cars do up front. In the long run though, it does lower running costs. Lower fuel prices and a higher fuel economy or mileage translates into a cheaper per kilometer cost. It also helps that CNG infrastructure has grown more than 10 times in a decade. And there's a government

target of hitting more than 18,000 stations by 2030. So, the conditions are finally falling into place. This then is where CNG will act as a transitional fuel. Goro Joshi, a former deputy Secretary at India's heavy industries ministry said that it would play that role for the next two to four years. That's at least until EVs become mainstream with adequate infrastructure necessary. For years, CNG cars were a tough sell, mostly because they came with fewer features like poor boot space, lower power and long queues at stations. The public perception was simple. It was impractical. Even the government had actually considered skipping CNG altogether. The plan was to jump straight from petrol to EVs. In fact, CNG retrofitting in older

cabs was kept alive only to avoid legal complications. What changed the equation was Tata Motors, when it launched a CNG variant of the Tiago hatchback in 2022. A year later, it added a twin-cylinder engine, which resulted in better boot space and more power. Then it brought that same logic to the Nexon, which is its best-selling SUV by adding. turbo engines. The CNG Next and Now makes up about 30% of the model's overall sales. Other companies soon started following suit. Maruti, which holds 70% of the CNG market, solved the boot space problem by fitting the tank under the body in its victorious SUV. It sold more than 500,000 CNG units in the nine months to December 2025. That's about two in

every five cars sold by the company in that period. Hyundai, after slipping from its number two carmaker position to number four is now leaning on CNG cars to win back its previous position. Currently, these CNG mixed cars make up more than 10% of the company's overall sales and it's targeting to hit 20% by 2030. So far, Mahindra remains the only outlier. Nalnikant Golagunta, the CEO of its auto division, told the Ken in an email response that they would consider CNG only if it can meet their customers' power expectations.

But there's still a problem. Despite having existed for over two decades, the CNG infrastructure here still has gaps. For example, some northeastern states have no CNG stations at all. Satasgar, meanwhile, has around 14. Also, prices vary widely, hitting nearly $120 per KG in Himatril Pradesh in January, while it was around $80 in Delhi.

Now, the Ken Hand reported earlier that Reliance Industries under-delivery from the KG D6 oil block had forced the country to be more dependent on imports. So, the government's longer-term answer is compressed biogas. It has mandated a phase blending of the fuel with CNG rising to 5% by FI29. Currently, there are over 130 biogas-producing plants in the country, and the government is keen on scaling it up by a lot to over 5,000 by 2030. Automakers are also already plugging in. into this plan. For instance, Suzuki has tied up with Baner's Dairy, which is one of the largest

milk producer cooperatives and the National Dairy Development Board in 2023. In December 2025, it also opened its first biogas facility in Gujarad. But all this will take time to translate into any real impact. As of now, CNG remains a stopgap. It can ease compliance pressure in the short term, but it can't restructure the industry. Vinkage Gulati, the form of president of FADA, an automobile industry body, said that CNG cars may continue to grow as a category. But can they truly replace patrol? I don't think so. Still, even though CNG may not be the future, at the moment, there does seem to be enough gas in the system for OEMs and customers to keep pressing the foot on that CNG battle. Daybreak is produced from the newsroom of the Ken, India's first

subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription offers daily long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the ken.com and click on the red subscribe button on the top of the Ken website. Today's episode was hosted and produced by my colleague Rachel Vargis and edited by Rajiv Sien.