Hero MotoCorp's annual report warns that proposed fuel-efficiency rules could raise costs in entry-level bikes, which account for 90% of sales. The April 2028 deadline may force rushed redesigns if targets are set late.
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Hero MotoCorp has become the first two-wheeler maker to flag the government's proposed CAFE norms as a material business risk. The company's FY26 annual report warned that tougher fuel-efficiency rules could raise costs in India's price-sensitive market.
"Abrupt implementation could leave OEMs unprepared, forcing rushed redesigns and higher compliance costs," the company said. The norms target fleet-wide CO2 emissions and fuel consumption for motorcycles and scooters. They are scheduled to take effect from April 2028.
Hero's exposure is concentrated in entry-level bikes. Of roughly 6 million vehicles sold in FY26, about 5.4 million came from the 75cc-125cc range. Passing compliance costs to those buyers would be difficult, the company said, threatening profitability and competitiveness.
Rivals Bajaj Auto and TVS Motor have not yet flagged CAFE as a risk in their filings. Both have a bigger electric-vehicle share in sales – Bajaj at 12%, TVS at 8% – versus Hero's 3%. Hero's Vida VX2 electric scooter has gained traction since its launch, with market share rising from 4% in Q4 FY25 to 11.1% in Q4 FY26, according to Motilal Oswal analysts.
Specific emission targets have not been set. The Bureau of Energy Efficiency is consulting with manufacturers and trade groups. Product development cycles are typically two to four years, leaving a tight window if rules are finalized late.
Hero said it plans to mitigate the impact through lightweight components and improved vehicle efficiency. It is also expanding its EV portfolio. The company is engaging with the Society of Indian Automobile Manufacturers to push for realistic targets.
Non-compliance could bring financial penalties, product recalls, and reputational damage, the annual report noted. Geopolitical tensions could accelerate the timeline, leaving companies less prepared.
Year to date, Hero MotoCorp shares have fallen 16%. TVS dropped 4% and Bajaj Auto gained 6% over the same period. The Nifty Auto index is down 6%.
CEO Harshavardhan Chitale said the company remains focused on strengthening its core business, accelerating premium and electric mobility, and expanding its global footprint. The warning from India's largest two-wheeler maker comes two years before the first CAFE deadline for the segment.
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